Kimlun Corporation - OUTPERFORM - 13 March 2012

Stock Name: KIMLUN
Company Name: KIMLUN CORPORATION BERHAD

Research House: KENANGA

Price Call: BUY

Target Price: 1.93

Kimlun announced that it has secured another two contractsfrom SP Setia and Keck Seng Bhd with a total contract sum of RM151.6m. Thefirst project was awarded by SP Setia for the construction works of service apartmentsand ancillary buildings in Johor Bahru (contract value of RM115m) and thesecond project was from Keck Seng Bhd for the construction of 244 units of housesin Johor Bahru with a contract value of RM36.9m. We are maintaining ourearnings forecasts at this juncture for Kimlun as we had factored in thesecontract values in its RM550m annual order book replenishment. The company'soutstanding order book now stands at around RM1.6b and we continue to maintainour OUTPERFORM recommendation on Kimlun based on an unchanged target price ofRM1.93 based on 8.0x PER pegged on its FY12 EPS.

Series of housingconstruction projects.  To recap,Kimlun was awarded a construction project worth RM68.3m by Dynasty View SBearlier this month. Yesterday, Kimlun nailed another two new projects from (1)SP Setia for the construction of apartments and ancillary buildings in JohorBahru worth RM114.7m, expected to complete by February 2014 and (2) Keck SengBhd  for the construction of 244 housesin Johor Bahru worth RM36.9m which would see an earlier completion aroundSeptember 2013.

Order book stands atRM1.6b.  Kimlun's outstanding order bookcurrently stands at RM1.6b and with its recent contract awards secured, thiswill provide earnings visibility for the group until 2015. Apart fromsuccessfully securing projects from the Johor region, management has reiteratedthat they are also actively looking for more construction opportunities underthe ETP initiative for the Greater KL project. 

Singapore market.  Management has previously guided that therewould be plenty of opportunities in Singapore as the Singapore government hasallocated approximately SGD60b worth of rail line and complex expresswayprojects over the next 10 years. We believe that given Kimlun's strong trackrecord, it would be a strong contender for the supply of precast products to theSingapore market. To recap, SPC Industries is a subsidiary of Kimlun and it hasmanaged to secure approximately 50% of the total TLS (tunnel lining segment)supply orders for the Downtown Line project in Singapore. 

We continue tomaintain our OUTPERFORM recommendation on Kimlun with an unchanged Target Priceof RM1.93 based on 8.0x PER pegged on its FY12 EPS.  There are also no changes to our FY12-13earnings forecasts at this juncture.

Source: Kenanga