News  Kimlun announced that they have bagged a RM115.5m contract from Country View Resources Sdn. Bhd., a wholly owned subsidiary of Country View Bhd for the construction of apartments in Johor Bahru, Johor.

Comments  This contract from Country View Bhd is the last contract win for 2013 and will further boost its year-todate construction orderbook replenishment to a historical high of c.RM1.2b, an 89% increase in orderbook replenishment as compared to 2012.

 However, we are neutral on the contract award as there would be no impact to its FY13 earnings given that the contract award only came in the last day of 2013 and the contract win is within our orderbook replenishment assumption of RM900m for FY14.

 We expect the construction works for this project to commence by 1Q14 and slated for completion by Dec-2015. Assuming a conservative 7% pre-tax margin, the entire project could contribute approximately RM6m to Kimlun’s bottom line, which is within our estimates.

Outlook  This contract will further boost Kimlun’s outstanding orderbook from c.RM2.0b to c.RM2.1b which will keep Kimlun busy for the next two years and we are expecting more meaningful contribution from its maiden property development project in Cyberjaya (The Hyve).

Forecast  No changes to our earnings estimates.

Rating Upgrade to MARKET PERFORM

 Following the recent retracement in Kimlun’s share price, our Target Price of RM1.93 now offers an upside of c.5% to its last closing price of RM1.83. Hence, we are upgrading our recommendation from UNDERPERFORM to MARKET PERFORM.

Valuation  No changes to our TP of RM1.93 based on an unchanged 9x FY14 PER.

Risks to Our Call  Delays in construction works.

 Labour shortage.

 Escalation of raw material prices.

Source: Kenanga