THE BUZZ
KimLun announced that it had accepted the letter of award from Esquire Corner SB for the construction of apartments and ancillary buildings in Shah Alam, Selangor for a total contract sum of RM148.5m. Construction is expected to be completed by Sept 2014.
OUR TAKE
Hits FY12 orderbook replenishment target. The announcement, which was a positive surprise, boosts KimLun's jobs secured YTD to an impressive RM745m. Going into 2H12, KimLun has already exceeded our expectations by achieving almost 100% of our full-year orderbook replenishment forecast of RM750m. Assuming a quarterly burn rate of RM200m-RM250m, the company's outstanding orderbook of RM1.77bn should last it well into 2HFY13. We make no changes to our assumptions for now, although we note that there is upside potential should the group secure the supply of tunnel lining segments to the KV MRT SBK line, as well as some possible jobs from the Singapore MRT's new line expansion.
More jobs likely.KimLun has already submitted a bid for the supply of tunnel lining segments (TLS) to the KV MRT SBK line, which we gather may be officially awarded this month. Although there is a possibility of the TLS portion being split into various packages and shared among KimLun and local boys such as Hong Leong Industries and MTD ACPI, we still think KimLun has a chance of securing at least a third of the works given the company's current involvement in Singapore's MRT extension. Meanwhile, we understand that the group is looking to secure more works from Singapore, with the tenders for the 35km underground power transmission cable comprising 2 tunnels having closed at end-February and expected to be officially awarded towards end-2012.
BUY. Going forward, we expect the flow of construction contracts to accelerate in the run-up to the impending general election. In light of this, we see KimLun as our best small-cap proxy play given its involvement in the KV MRT project and Singapore's MRT extension. Hence, we maintain our BUY call, at an unchanged FV of RM2.37, based on a FY12 PER of 12x.