HLIB Research

PP 9484/12/2012 (031413)

Kimlun Corporation (BUY ; EPS ) 4 May 2016

INDUSTRY: OVERWEIGHT Price Target: RM2.23 ( )
NEWSBREAK Share price: RM1.73

Accelerating job wins Jeremy Goh, CFA

News  Affordable housing contract. Kimlun announced that it has pwgoh@hlib.hongleong.com.my
been awarded a RM165.8m contract from Hillcrest Gardens (603) 2168 1078
to build 5 blocks of affordable apartments in Mukim Petaling
under the Rumah Selangorku housing scheme. The works KLCI 1651.4
are expected to be completed by April 2019. Expected share price return 28.9%
Expected dividend return 2.3%
Comments  Job wins are stacking up. With this recent contract, we Expected total return 31.2%
estimate YTD job wins to stand at RM1.1bn. Despite being
in the early days of May, YTD job wins have already Share price
surpassed the full year sum of RM830m achieved last year. RM Pts
2.2 1850
At the rate things are going, we reckon it is likely that job
2.0 1800
wins will surpass its previous high of RM1.2bn, achieved in
1.8 1750
FY13.
1.6 1700
 Healthy orderbook level. We estimate Kimlun’s total 1.4 1650
orderbook (i.e. construction + manufacturing) to now stand 1.2 1600
at RM2bn. This translates to a cover ratio of 1.9x on FY15 1.0 1550
KICB (LHS) KLCI (RHS)
Group revenue which we regard as relatively healthy 0.8 1500
considering the fast turnaround nature of Kimlun’s jobs. May-15 Jul-15 Sep-15 Nov-15 Feb-16 Apr-16

 Tapping on other avenues. Management shared that the Information

slowdown at Iskandar has impacted high rise buildings the Bloomberg Ticker KICB MK
Bursa Code 5171
hardest. To counter this, Kimlun is tapping on other
Issued Shares (m) 301
segments such as affordable housing, factories and Market cap (RM m) 520
industrial buildings. It has also started tendering more 3-mth avg. volume (‘000) 898
aggressively within the infra space as well as outside of its SC Syariah Compliant Yes
usual Johor market. This recent contract win, which involves
affordable housing in Selangor, verifies that management’s Price Performance 1M 3M 12M
efforts to tap on other avenues for jobs are paying off. Absolute -4.9 13.8 36.2
Relative -0.7 14.2 50.0
Risks  Iskandar slowdown hampering new job wins for the
construction division. Major shareholders
Phin Sdn Bhd 36.2%
Forecasts  As YTD job wins of RM1.1bn is still within our full year Khang Hau Pang 5.8%
assumption of RM1.45bn (construction: RM1.2bn and Tin Pang 5.2%
manufacturing: RM250m), we maintain our earnings
forecast. Summary Earnings Table
FYE Dec (RM m) FY14 FY15 FY16F FY17F
Rating Maintain BUY, TP: RM2.23 Revenue 1,206 1,054 1,042 994
EBITDA 92 115 110 112
 Kimlun has manged to successfully reduce its dependency
EBIT 67 94 86 87
on the Iskandar property market as evident by its robust job Profit Before Tax 60 93 81 81
flows. It is also a prime beneficiary of the MRT2 rollout via Core PATAMI 34 64 61 61
the supply of SBG and TLS. vs Consensus (% ) (3) (8)
Core EPS (sen) 11.9 21.4 20.2 20.1
Valuation  Our TP of RM2.23 is based on an unchanged 11x P/E P/E (x) 14.6 8.1 8.6 8.6
multiple (mean: 10.7x) pegged to FY16 earnings. Net DPS (sen) 3.8 5.8 4.0 4.0
Net DY (% ) 2.2 3.4 2.3 2.3
BV per share 1.33 1.53 1.65 1.81
P/B (x) 1.3 1.1 1.1 1.0
ROE (% ) 12.7 15.0 12.7 11.7
Net Gearing (% ) 19.1 14.7 7.0 CASH

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Berhad (10209-W)
Level 23, Menara HLA
1. As of 04 May 2016, Hong Leong Investment Bank Berhad has proprietary interest in the No. 3, Jalan Kia Peng
following securities covered in this report: 50450 Kuala Lumpur
(a) -. Tel 603 2168 1168 / 603 2710 1168
Fax 603 2161 3880
2. As of 04 May 2016, the analyst, Jeremy Goh, who prepared this report, has interest in the
following securities covered in this report:
(a) -.

Equity rating definitions

BUY Positiv e recommendation of stock under cov erage. Ex pected absolute return of more than +10% ov er 12-months, w ith low risk of sustained dow nside.
TRADING BUY Positiv e recommendation of stock not under coverage. Ex pected absolute return of more than +10% ov er 6-months. Situational or arbitrage trading opportunity .
HOLD Neutral recommendation of stock under cov erage. Ex pected absolute return betw een -10% and +10% ov er 12-months, w ith low risk of sustained dow nside.
TRADING SELL Negativ e recommendation of stock not under coverage. Ex pected absolute return of less than -10% ov er 6-months. Situational or arbitrage trading opportunity .
SELL Negativ e recommendation of stock under cov erage. High risk of negativ e absolute return of more than -10% ov er 12-months.
NOT RATED No research cov erage and report is intended purely for informational purposes.

Industry rating definitions

OVERWEIGHT The sector, based on w eighted market capitalization, is ex pected to hav e absolute return of more than +5% ov er 12-months.
NEUTRAL The sector, based on w eighted market capitalization, is ex pected to hav e absolute return betw een –5% and +5% ov er 12-months.
UNDERWEIGHT The sector, based on w eighted market capitalization, is ex pected to hav e absolute return of less than –5% ov er 12-months.

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