Kimlun’s order book to remain strong through FY13

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KUCHING: Kimlun Corporation Bhd (Kimlun) is setting a new construction order book target of RM600 million to RM900 million for financial year 2013 (FY13) as analysts are cautious on the company’s earnings growth for the period.

According to RHB Research Institute Sdn Bhd (RHB Research) in its research report, “Apart from repeat building jobs from long-time customers, Kimlun hinted at potential jobs from a highway project outside Johor, work packages from the Khazanah-led Desaru rehabilitation project as well as building jobs for private schools in Johor.”

The company noted that construction order book replenishment was not a concern at present. On the other hand, its main worries were the rising input costs, particularly the costs of services provided by specialist subcontractors, as well as its ability to hire more or retain experienced engineers and project managers.

At the current juncture, RHB Research noted that Kimlun’s order book stood at RM1.2 billion, including about RM100 million worth of new building jobs it secured year-to-date.

“Despite the highly positive outlook for its concrete products division backed by the Klang Valley My Rapid Transit project and sustained property development activities in Malaysia and the underground cable tunnel projects in Singapore, Kimlun is unlikely to embark on another around of capacity expansion,” the research house added.

It pointed out that the company had just expanded its plant in Johor and built a new plant in Seremban.

“Kimlun, in its usual conservative fashion, wants to see more clarity in terms of sustained order flows before investing in new capacity,” it explained.

The company hoped to launch its five-acre small-office-home-office (Soho) project in Cyberjaya in the second quarter of FY13.

“The project, known as The Hyve, has a gross development value of RM200 million.”

However, the company stressed that it did not aspire to become a major property developer despite more plans for an industrial development on a land measuring 43 acres in Nilai, Negeri Sembilan.

RHB Research thus pegged a fair value of RM2.05 per share for Kimlun. However, the research hose expected construction stocks to trend downwards during the early part of this year as the general election deadline draws near.

“After the 13th General Election’s dust settles, we believe investors will refocus on sector fundamentals that are reasonably attractive, underpinned by a construction upcycle backed by various large-scale infrastructure, property and oil and gas projects driven by multiple parties.”