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Kimlun Corporation - FY12 within expectations

kiasutrader
Publish date: Tue, 26 Feb 2013, 11:37 AM
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Period  4Q12/FY12

Actual vs. Expectations    Kimlun's FY12 net profit of RM49.3m came in within ours and the consensus estimates, accounting for 104% of ours and the consensus FY12 estimates of RM47.3m and RM47.8m respectively.

Dividends    A single tier dividend of 4.8 sen was proposed as expected.

Key Results Highlights   QoQ, Kimlun's net profit grew marginally by 3% to RM12.2m albeit a revenue growth of 10% due to its operating margin compression of 2.3ppt to 5.3%.

 YoY, its pretax profit declined by 27% from RM15.8m to RM11.6m given a margin compression of 3.5ppt from 8.4% to 4.9% as its financing cost rose 82% to RM2.2m and there were lower margin construction jobs recognised. The construction margin declined by 3.7ppt from the double digit level of 10.9% to just the mid-single digit level of 7.2%.

 YoY, the full year FY12 net profit improved by 16% to RM49.3m, underpinned by the robust revenue growth from its construction (+34%) and manufacturing (+92%) divisions and a lower effective tax rate of 19.4%.

Outlook  Its current order book remains strong at RM1.6b, which will provide earnings visibility for the group for the next two years. We believe that the huge order book will keep Kimlun busy throughout these years.

 We believe that Kimlun will continue to bid for more building projects with better margins in Johor and the Klang Valley. With its expertise in precast construction, we believe that this will enable it to stand a higher chance to secure government-related projects and high-rise residential projects, especially in the Iskandar region.

Change to Forecasts  There are no changes to our FY13-FY14E earnings estimates.

Rating   Maintain OUTPERFORM
 Our OUTPERFORM recommendation is maintained as there is a potential upside of 29% to our Target Price of RM1.77. The strong order book provides a good earnings visibility for the group.

Valuation  We are maintaining our Target Price of RM1.77 based on a 7.0x PER on its FY13E EPS of 24.7 sen.

Risks  Higher than expected building material costs.
 Stiff market competition that could further lower its margins.

Source: Kenanga
KIMLUN (5171)
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