We are convinced that FY22 would be a year backed by strong replenishment prospects from both its precast and construction arms. We note there is room for upside surprises given the number of key mega projects they are aiming for. Its property division which has been lying low for the past few years is also expected to see a ramp-up in launches and higher contributions moving forward. BUY with a TP of RM1.25 pegged to 9x FY22E PER. We continue to like the name for its potential sharp earnings turn-around given its exposure to MRT3.

YTD, Kimlun has replenished RM1.162bn worth of contracts (construction RM1bn; precast manufacturing RM162m) in line with our RM1.1bn revised target. Note, Kimlun has surpassed initial replenishment targets back in Nov 2021 when they won the Sabah Sarawak Link Road contract worth RM780m. Currently, Kimlun’s outstanding order-book stands at c.RM2bn (construction c.RM1.7bn; precast c.RM0.3bn).

Kimlun’s replenishment prospect for FY22 is bright, led by key mega projects from RTS, Pan Borneo Phase 2, Autonomous Rail Transit, Iskandar BRT and Central Spine Road. There could be room for upside surprises if Kimlun manages to secure more than two of the said projects. That said; we expect competition to be tight (i.e. lower GP margins of 6-7%) given the lull in projects over the past two years.

Management guides that its precast division utilisation rate remains high backed by outstanding order-book of RM0.3bn which would last them a solid six months. Management is optimistic in securing orders from Singapore’s Jurong Region MRT line which already has its main construction packages being dished out.

Kimlun has scheduled three launches with total GDV of RM200-300m in FY22 namely: (1) Bukit Bayu Bungalows Phase 2A (16 units) at RM37m GDV, (2) Bukit Bayu Bungalows Phase 2B (23 units) at RM50m GDV and (3) commercial development at Seri Alam (Kimlun owns 69.5% stake – tentative GDV of RM200m assuming land/GDV of 20%). Currently, Kimlun is still pending land sale completion of its 49%-owned Alam Damai land (Cheras) which will likely see launch commence in FY23 (GDV of c.RM600m assuming 15% land/GDV)

Source: Rakuten Research - 13 Dec 2021