Kimlun’s construction revenue to pick up pace as major projects shift into high gear
KUCHING: Kimlun Corporation Bhd’s ( Kimlun) construction revenue is expected to pick up its pace as major projects such as the Pan Borneo Highway, shift into high gear.
Kenanga Investment Bank Bhd’s research arm ( Kenanga Research) said: “Moving forward, we expect construction revenue to pick up pace as major projects, such as Pan Borneo; move into more advance billing stages.”
As for its manufacturing arm, the research team pointed out that Kimlun has secured about RM90 million of manufacturing orders, making up 30 per cent of its targeted RM300 million replenishment.
“Replenishment target is backed by potential Singapore manufacturing packages, which are DTSS 2, MRT Circle line 6 and North South Corridor Expressway,” it noted.
It added, Kimlun’s current outstanding manufacturing order- book stands at RM0.35 billion providing visibility for circa two years.
“We anticipate contributions from KVMRT2 TLS and SBG to continue picking up pace in the fourth quarter of 2017 (4Q17),” it opined.
Meanwhi le, on Kimlun’s recently purchased freehold land from Mah Sing Group Bhd ( Mah Sing), Kenanga Research said it is neutral on the acquisition.
Of note, Kimlun acquired two plots of freehold land (total 23ac) from Mah Sing for RM36.1 million.
“Given the lengthy timeline of acquisition, we are neutral on the land purchases, as we believe they would only be developed from the financial
Moving forward, we expect construction revenue to pick up pace as major projects, such as Pan Borneo; move into more advance billing stages. Kenanga Research
year 2020 ( FY20) onwards and contributions would only be felt then,” it opined.
It also noted that as no gross development value ( GDV) guidance was available, based on a tentative land/GDV ratio of 10 to 15 per cent, it expected the two pieces of land to generate a potential GDV range of RM240 million to RM360 million.
“Net- gearing wise, it will increase to 0.12-folds level (from 0.06-folds as of 3Q17), which is still manageable,” it added.
Moving forward, it opined that Kimlun would continue to purchase pocket of land banks in Johor if the opportunity arises given their manageable gearing level.
The research team explained, “Cu r rent ly, out st a nd i ng construction order-book stands at circa RM2.1 billion providing visibi l ity for the next two years. Note that year to date construction wins stand at RM940 million making up 94 per cent of our FY17E replenishment target.”
Post- acquisition, Kenanga Research retained its FY17 to FY18E earnings estimate as it only expected developments to take place from FY20 onwards.
All in, it pegged a ‘ market perform’ call on the stock.