PETALING JAYA: Kimlun Corp Bhd has been securing new contracts, after recently announcing its third construction project win since March this year.
In a note, Hong Leong Investment Bank Research (HLIB Research) said the recent RM234mil win from Saujana Development Sdn Bhd, coupled with the RM150mil contract from Singapore-listed Astaka Holdings Ltd and RM143mil from Melia Spring Sdn Bhd, has set the trajectory for the group this year.
According to HLIB Research, combining the estimated new construction wins secured in the first quarter of 2024, coupled together with wins year-to-date, the amount currently stands at RM1.05bil, surpassing management’s target and forming 80% of its revised replenishment assumption.
“With this, our estimate of the company’s unbilled construction order book rises to RM2.8bil, whereas the previous high was RM1.9bil achieved in financial year 2018 (FY18). With ample time remaining in FY24, we see upside risks to our revised assumptions. Kimlun’s tenderbook of RM2bil translates to further potential wins in the pipeline,” HLIB Research said.
It added that the group’s order book of RM370mil for precast concrete is at a healthy level, while the group should be able to secure RM200mil in new orders for the segment with more potential upside.
“Higher demand for industrial building system components, data centres, an impending infrastructure upcycle in Singapore’s MRT network, airport and seaports, as well as the rollout of mega projects in Malaysia, could benefit the company” the research house said.
HLIB Research also said Kimlun’s capacity expansion is expected to be commissioned and will commence operations in September this year, particularly as the infrastructure upcycle in Singapore takes off.
The research house said it is maintaining its “buy” call with an unchanged target price of RM1.72, as Kimlun has proven itself to be a proxy for mahor infrastructure projects.
Meanwhile, Kenanga Research said it is maintaining its “market perform” call with a higher target price of RM1.47 as Kimlun is poised to benefit from a new wave of public infrastructure projects.
The research house said it expects a brighter outlook for Kimlun as it eyes work packages and pre-cast concrete orders from multiple projects.
These include the Pan Borneo Highway, flood mitigation projects, semiconductor factories and urban transit projects in Singapore.
“We like Kimlun because it is a beneficiary of the rollout of public infrastructure projects, it capitalises on the stable public infrastructure sector in Singapore with its precast concrete products manufactured in Johor, and its strong earnings visibility is backed by a construction order book of RM2.64bil, which will keep it busy for the next two to three years,” Kenanga Research said.
It noted, however, Kimlun’s valuations are rich after a recent run-up in its share price.
Kenanga Research said some of the downside risks for the company include delays in the rollout of public infrastructure projects, liquidated ascertained damages arising from cost overruns and delays, rising cost of building materials and labour shortages.