PETALING JAYA: Engineering and construction firm Kimlun Corp Bhd is well-positioned to secure jobs from the upcoming Johor Baru-Singapore Rapid Transit System (RTS), of which construction works are slated to begin in January 2021, said Hong Leong Investment Bank Research.
The research firm said in a report that it estimated roughly RM2.2bil-RM2.6bil worth of civil works are up for grabs for the Malaysian portion.
“Additionally, manufacturing contracts anticipated to be secured this year include the extension of Singapore MRT rail network and the North-South Corridor Expressway, ” it said, adding that based on previous guidance, award size for this ranged between RM80mil and RM120mil and were anticipated to come in by financial year 2020 (FY20).
These comments follow an announcement made by the Johor-based Kimlun on Monday that it had entered into an agreement to acquire a 49% stake in a company for RM40mil.
The company is in the midst of acquiring 43 acres of prime land in Cheras.
“Post-acquisition, estimated net gearing will rise to around 0.60 times, which we believe to be rather manageable, “ said Hong Leong Investment Bank Research (HLIB Research).
Under the agreement, Kimlun’s purchase price for its ownership of the land translates to an “attractive” RM43-RM50 per square foot, especially considering the land is located at a prime and matured area, the research house noted.
Development works are expected to start in 2022 comprising apartments, condominiums as well as shop lots with a preliminary gross development value and gross development cost of RM2.2bil and RM1.94bil, respectively, it pointed out.
Premised on these, HLIB Research is keeping its “buy” call on Kimlun with a target price of 90 sen.
The stock was traded between 75 sen and 76 sen yesterday, giving the entire company a market value of RM257mil.
HLIB Research’s target price of 90 sen for the Kimlun stock is derived based on Kimlun’s FY21 earnings to reflect a more normalised earnings for the company.
It also said the stock is currently traded at an “attractive” FY21 and FY22 price-to-earnings multiple of 5.6 times.
In the first quarter ended March 31,2020, Kimlun saw its net profit fall to RM6.6mil from RM15.93mil a year earlier.
Its revenue was also lower at RM245.33mil versus RM318.56mil for the same period, a year earlier.
In June, Kenanga Investment Bank said it liked Kimlun “for their small earnings base and all-round involvement in either big infra projects or smaller-scale affordable homes, which would play to their advantage when pump priming initiatives commence.”
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