PETALING JAYA: After a sluggish first half in financial year 2024 (1H24), Kimlun Corp Bhd
expects to see a stronger revenue performance in 2H24, says Hong Leong Investment Bank (HLIB) Research in a report following a recent briefing with its management.
The research house said Kimlun’s guidance of a stronger 2H24 revenue performance is driven by acceleration in construction billings, active precast orders and property recognition.
“Likewise, core earnings should follow suit. A record high order book of RM3.5bil could still grow on the back of higher tenders worth RM4.4bil.
“The precast segment should benefit from the construction upcycle in Singapore and Malaysia.
“The timeline on new property projects is on track to benefit from healthy sentiment in Johor,” said the research house.
The engineering and construction services provider recorded a sluggish 1H24 performance with a revenue and core loss after tax and minority interest of RM487.3mil and RM1.2mil, respectively.
“Its results lagged against our expectations resulting in the lowering of our previous financial year 2024 (FY24) forecast by 22.4%, adjusting for lower margins.
“Nevertheless, we had also raised the forecast FY25/FY26 core profit after tax and minority interests by 0.5%/6.6%, having lifted our forecast FY24 construction orderbook win assumption from RM1.3bil to RM1.9bil,” said HLIB Research.
It added that the group’s Sabah-Sarawak Link Road phase one project, which saw billings acceleration in the second quarter (2Q), is expected to further gain pace in the coming quarters, while previously secured jobs in 2023 also start contributing.
“In our view, the sequential slowdown trend seen in manufacturing revenue is expected to reverse now that some projects have progressed beyond the design stage.
“These factors coupled with the launch of its property project, Pinegate Residence phase one, could underpin earnings in 2H24 with construction having commenced since late-2023. Overall, we anticipate improvement in 3Q core earnings leading to a stronger 4Q.”
According to HLIB Research, Kimlun’s construction order book now stands at a new record high of RM3.15bil, translating to an increase of 66% against its previous high in FY18. The research firm noted that construction wins totalling RM1.5bil in 1H24 had surpassed the firm’s FY24 assumptions twice.
Tender book meanwhile, has continued to stay elevated with construction and precast tender values of RM4bil and RM400mil, respectively.
Valuation-wise, the stock at 7.3 times implies its high order book levels have not been priced in, said the research house.
“Maintain ‘buy’ with an unchanged target price of RM1.73,” it said.
