It said on Wednesday the results came in broadly within expectations at 23% and 21% of its full-year forecast and full-year consensus estimates respectively.
“Our FV is based on 12 times FY18F fully diluted EPS, which is in line with our one-year forward target PE of 10-12 times for small-cap construction stocks,” it said.
AmInvestment Research said 1QFY17 net profit declined 10% year-on-year. Kimlun's large on-going construction jobs were at the tail end while the newer ones had yet to hit major billing milestones.
Similarly, for the manufacturing division, Kimlun was completing orders from Singapore during the quarter, while the delivery of orders from MRT2 had yet to pick up significantly.
“Nonetheless, its near-term earnings visibility remains good, underpinned by construction and manufacturing order backlogs of RM1.59bil and RM330mil respectively, which will keep it busy at least for the next 12-18 months.
“We continue to like Kimlun as it is a good proxy to the booming local construction sector given its involvement in the MRT2 (supply of precast concrete segments), Pan Borneo Highway and the
construction of affordable housing,” said the research house.
AmInvestment Research projects Kimlun's net profit to contract by 19.9% in FY17F from a high base a year ago (largely due to lumpy variation order claims recognised during the year).
The company’s earnings growth momentum should resume in FY18F (+19.8%) underpinned largely by the recovery in manufacturing earnings as production and delivery of the MRT2 and Eastern Rail Link (Singapore) orders gather pace.
The research house pointed out Kimlun's earnings profile has improved tremendously as it no longer relies solely on residential building jobs.
Kimlun has expanded to the construction of a hospital (Gleneagles Medini, RM105mil), a shopping mall (IGB's Southkey Megamall, RM38mil), hostels (Sime Darby's Pagoh Education Hub, RM38mil) and a government office (Johor Bahru City Council complex, RM263mil), as well as infrastructure (a section of Pan Borneo Highway, RM1.46bil, via a 30%-owned JV with Zecon).
The manufacturing unit has widened its product offering with the latest being rail sleepers and parapet walls.
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