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Friday, January 18, 2013

KimLun Corp Bhd - First Job Win For 2013 (OSK)

buy: Fair Value : MYR 2.46 
THE BUZZ - KimLun announced yesterday that its wholly-owned subsidiary, Kimlun SB, has accepted a letter of award from Setia Indah SB for the construction of apartments and ancillary buildings in Johor Baru for RM87.7m. Works are expected to be completed by January 2015.

A good start to 2013. This contract is KimLun’s first job win in more than seven months. It secured more than RM794m worth of jobs in 1H2012. We deem the contract, the company’s maiden win for 2013, within our expectations while our FY13 orderbook replenishment target remains unchanged at RM800m. the company’s current outstanding orderbook estimated at about RM1.4bn can last it well into 1HFY2014, assuming a quarterly burn rate of RM200m-RM250m. That said, we believe the company’s earnings will trend higher over the next few quarters and that it might end 2013 with its highest profit ever since listing in 2H 2010.

To launch maiden property project soon. Meanwhile, we gather that management would soon launch the company’s maiden property venture in Cyberjaya, with a target soft launch by mid-1Q13. The project, comprising 768 SOHO as well as office units, has a GDV of just over RM200m. We understand that the pricing of the units on a per square foot basis would be around RM500-RM600, which we deem reasonable.

BUY. We make no adjustment to our forecasts at this juncture. Maintain BUY, with our FV unchanged at RM2.46, based on an unchanged 10x FY13 PER. KimLun continues to be one of the best small cap proxies to the construction sector given its strong execution track record, sturdy outstanding orderbook and undemanding valuation.

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