The research house said Kimlun’s weaker third quarter results was affected by slower construction works recognition and lower contribution from the manufacturing segment.
“Excluding forex gains of RM1mil, 3Q16 core net profit of RM16mil brings 9M16 core net profit to RM58mil, accounting for 78% of ours/consensus full-year forecasts,” Maybank said.
It added that margins from manufacturing have begun to normalise after benefitting from the stronger Singapore dollar against ringgit in the first half of 2016 as majority of manufacturing earnings is from Singapore projects.
However, Maybank said the blended margins marginally improved (+0.9ppts YoY) on the back of stronger construction margins (+1.3ppts YoY, flat QoQ).
“The stronger construction margin was attributed to execution of better margin projects and lower raw material price,” it said.
Kimlun’s outstanding orderbook for construction and precast are at RM1.78bil and RM280mil respectively at end-Sept 2016.
“It is still eyeing for more construction jobs from KVLRT 3, affordable housing projects (PR1MA & PPA1M) as well as more precast orders from rail projects in Malaysia and Singapore.
“However, we believe these are already reflected in the current share price which values the stock at 8.8x 2017 PER close to its long-term mean of 8.7x (since 2011),” Maybank said.
It has a “hold” call on Kimlun with a target price of RM2.06.
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