PETALING JAYA: Kimlun Corp Bhd
had a slow start in the first quarter of financial year 2024 (1Q24) as its new construction projects were still at early stages of execution, says Kenanga Research.
Nonetheless, the research firm said the engineering and construction services provider is poised to benefit from a new wave of public infrastructure projects.
“Kimlun’s 1Q24 net profit (of RM537,000) only made up 1% of both our full-year forecast and the full-year consensus estimate.
“However, we consider the results within expectations as we expect strong results in coming quarters,” the research firm said in a post-results review.
It noted that as at March 2024, the group’s construction outstanding order book stood at RM2.26bil, from RM1.9bil three months ago.
Meanwhile, the order book of the manufacturing unit stood at RM370mil, up from RM300mil previously.
“Moving forward, we project a brighter outlook for Kimlun in FY24 backed by the roll-out of public infrastructure projects.
“We understand that the company is eyeing work packages and pre-cast concrete product orders from the Pan Borneo phase 2, flood mitigation projects, semiconductor factories, and the Mass Rapid Transit 3 project.
The research firm said it was maintaining the RM1.47 target price based on 10 times FY25 price-to-earnings ratio, which was at a discount to 18 times it ascribed to mid-sized to large contractors.
Meanwhile, Hong Leong Investment Bank (HLIB) Research said Kimlun’s plans to launch its 30 storey serviced residence, Pinegate Residency in Plentong, Johor is on track for 3Q24.
“We gather that the project commenced construction last year and is now at the structural stage.
“Profit margins are set to be healthy considering low land-to-gross development value (GDV) of less than 7%.”
It added billing recognition for the project could be steeper upon project launch due to the stage of completion. The project has a GDV of RM300mil, comprising 896 units.
HLIB Research said the group’s leading indicators are positive despite Kimlun’s 1Q24 core earnings missing expectations due to the gap between new and old projects.
“We maintain a ‘buy’ with a higher target price of RM1.72, from RM1.38.”
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