KUALA LUMPUR: Hong Leong Investment Bank (HLIB) Research is retaining its Buy call for construction company Kimlun Corporation with a target price of RM2.65.
It said on Thursday although it forecasts earnings to decline by 22% this year, it is positive on a recovery in FY18 (+20%) underpinned by its strong job wins leading to a record high orderbook.
“Our TP of RM2.65 is based on an 11 times price-to-earnings (P/E) multiple ascribed to FY18 earnings (mean: 12 times),” it said.
On Wednesday, Kimlun announced it was buying from UEM Sunrise
(UEMS) 11.734 hectares of freehold agriculture land from the latter for RM82.1mil.
The land is within Iskandar Puteri and is near Horizon Hills, Eco Botanic and Taman Nusa Sentral. It is roughly 5km (by road) north-west of Kota Iskandar. The land has been zoned for commercial use and Henry Butcher Malaysia has appraised the land at RM83mil.
“The pricing for the land works out to be RM65psf. Our property analyst feels that this may be on the high side when compared to the recent transacted price of RM43.4psf when UEMS sold a parcel of land to Country View. It is nonetheless noted that the land that Kimlun is buying is much smaller in size.
“Kimlun intends to develop commercial properties on the said land but no further details were given,” it said.
HLIB Research said as of 3Q17, Kimlun’s net gearing was low at 5.5%. On a proforma basis, the land purchase would increase its net gearing to 19.6% which the research house deemed as manageable.
“As of 9M17, property contributed a minimal 2.5% to revenue. Kimlun has thus far only undertaken two developments, with take up rate at 90% for The Hyve (launched 2012) and 50% for Pekan Nenas
(launched 2015),” it said.
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