Flat top line, profits for Kimlun in FY18
KUALA LUMPUR: AmInvestment Bank Bhd (AmInvestment Bank) project Kimlun Corporation Bhd's (Kimlun) top line and profits to stay relatively flat in financial year 2018 (FY18) in line with its latest profit guidance.
Speaking to the press after its Annual General Meeting (AGM) last Friday, chief executive officer Sim Tian Liang guided for “flat top and bottom linegrowth” in FY18 due to “escalating trade war between China and the US” and “costlier fuel cost, steel price andwages”.
This was partially mitigated by savings from the abolishment of the Goods and Services Tax (GST).
AmInvestment Bank saw that prospects of the local construction sector were unfavourable as the government reconsiders various mega infrastructure projects on grounds of fiscal prudence.
“Apart from the KL-Singapore high-speed rail (HSR) and MRT 3, we believe more mega projects could potentially be deferred, scaled down or cancelled.
“However, we believe the selldown on Kimlun shares after the 14th General Election has been overdone.
“At present,the stock trades at only 6.7 times its FY19F earnings per share, which is below our benchmark forward target price earnings ratio of seven to nine times for small cap construction stocks.
“We also take comfort in Kimlun's construction and manufacturing order backlogs of RM2bil and RM421mil respectively, which will keep it busy at least for the next one or two years.”
Despite the cutbacks on local public jobs, AmInvestment Bank believed Kimlun's earnings could be sustained as it depends largely on private sector building jobs coupled with recurring orders for its precast concrete segments from infrastructure projects in Singapore.