We reiterate a BUY call on Kimlun with TP raised to MYR2.13 (from MYR2.08, 20% upside) based on higher projections. These take into account a higher-than-expected SBG supply contract win. Separately, we still expect the firm to win the MRT2 TLS supply contract that may be dished out soon. It is also aggressive in tendering for other infrastructure projects with higher margins.

Segmental box girders (SBG) supply contract. Mass Rapid Transit Corporation SB (MRT Corp) has appointed Kimlun Corp’s (Kimlun) whollyowned subsidiary SPC Industries SB as the designated supplier of SBG to certain packages of the Projek Mass Rapid Transit Line 2 (MRT2) (Sungai Buloh-Serdang-Putrajaya) for MYR199.9m. The SBG supply is expected to spread over a period of approximately 44 months.

Another positive win. We are excited over the company’s latest SBG supply contract win. While the contract value was slightly lower than a similar product it supplied to the MRT1 project (at MYR223.2m), we had earlier assumed only MYR150m in our financial model. This announcement also came in just weeks after Kimlun’s 30:70 joint-venture (JV) with Zecon was awarded by Lebuhraya Borneo Utara SB the project to develop and upgrade the Pan Borneo Highway (Sarawak). This was valued at MYR1.46bn.

More pipeline contracts? Aside from the latest win, we still await the resultson the tunnel lining segments (TLS) supply contract for the MRT2 project. We have assumed MYR50m worth of TLS to be supplied by Kimlun. We expect theaward to be announced imminently. Separately, the company is also aggressively tendering for various infrastructure projects and low-rise developments, which command higher margins.

Forecast and risks. With the SBG supply contract being MYR50m higher than our original expectations, we have accordingly incorporated the latest numbers, which raise our FY16-17 estimates by 0.7-1.3%. Key risks include new construction job wins and the TLS supply contract falling short as well as weaker-than-expected margins.

Maintain BUY with a higher TP. We continue to like Kimlun for its strong order book replenishment record YTD. As we still expect the company to win more projects that are in its tender pipeline, we are keeping our BUY recommendation. However, our TP, which was derived from ascribing a 10x fully-diluted FY17 P/E (in line with our target P/Es of 10-12x for small-cap construction stocks), is revised up to MYR2.13 (from MYR2.08). This was after accounting for higher earnings.