We reiterate BUY on Kimlun with TP raised to MYR2.08 (from MYR1.81, 28% upside) based on higher projections. These take into accountcontributions from its latest Pan Borneo Highway (Sarawak) project win. Separately, the firm is one of the only two established precast concrete suppliers of MRT segments locally and such contracts may be dished out soon. It is also aggressive in tendering for other infrastructure projects with higher margins.

Post result briefing. We attended Kimlun Corp’s (Kimlun) well-attended post FY15 results briefing (>50 sell- and buy-side analysts, and fund managers). The briefing was chaired by CEO/ED Ir Mr Sim Tian Liang and ED/CFO Ms Vennessa Yam. They were generally pleased with Kimlun’s record profit in 2015 and prudent in guiding the company’s outlook in 2016. This was because most of the contracts were still at the tendering process. Meanwhile, new order wins in FY15 amounted to MYR750m, with the outstanding construction orderbook standing at MYR1.1bn as at end-2015. Kimlun targets to replenish its orderbook by MYR600m-800m in FY16 (excluding the expressway project). Winning of Pan Borneo Highway roadworks package. The major surprisewas Kimlun’s announcement to Bursa Malaysia on 10 Mar that its 70:30 joint venture (JV) with Zecon had been awarded the project to develop and upgrade the Pan Borneo Highway (Sarawak) from the Serian roundabout to the Pantu junction. The project was awarded by Lebuhraya Borneo Utara SB and is valued at MYR1.46bn. It is slated for completion within 48 months. The new job win, which was not part of our original estimates, have seen our FY16-18 projections raised by 1.4-7.8%.

Waiting for more contracts. Aside from the latest win, all eyes are on the contract to supply precast concrete products to the Mass Rapid Transit 2 (MRT2) project. Kimlun is one of only two established suppliers of MRT precast concrete segments locally. In 2012, it secured about half of MRT1’s precast oncrete segment supply contracts in value terms, comprising tunnel lining segments (TLS) (MYR48.5m) and segmental box girders (SBG) (MYR223.2m).

We understand the SBG tender has been closed and, hence, an award can be expected in the next few weeks. This would be followed by the TLS supply contract, for which the tender has yet to be called. Separately, Kimlun is also aggressively tendering for various infrastructure projects with higher margins. Maintain BUY with a higher MYR2.08 TP (from MYR1.81). As we believe most of the new contract wins may have limited recognition in FY16, we rollover our valuations to FY17 but keep our parameters at 10x fully-diluted P/E (in line with our target P/Es of 10-12x for small-cap construction stocks). This is to better reflect the firm’s prospects. Accordingly, our TP is revised up to MYR2.08 with our BUY call maintained. Key risks include new job wins and supply contracts falling short as well as weaker-than-expected margins.