Kimlun Corporation

Price RM1.73

Fair Value RM2.10

52-week High/Low RM1.75/RM1.05

Key Changes

Fair value

EPS

YE to Dec FY15 FY16F FY17F FY18F

Revenue (RM mil) 1,053.6 984.8 1,079.7 1,033.9

Core net profit (RM mil) 70.7 69.0 79.4 75.6

FD Core EPS (sen) 19.6 19.1 22.0 20.9

FD Core EPS growth (%) 109.2 (2.4) 15.1 (4.9)

Consensus Net Profit (RM mil) - 62.9 66.1 71.0

DPS (sen) 5.8 6.8 6.8 6.8

PE (x) 8.8 9.0 7.9 8.3

EV/EBITDA (x) 5.6 5.5 5.1 5.5

Div yield (%) 3.7 4.4 4.4 4.4

ROE (%) 16.4 14.2 14.7 12.6

Net Gearing (%) 14.7 5.2 7.1 7.9

Stock and Financial Data

Shares Outstanding (million) 300.6

Market Cap (RMmil) 520.0

Book Value (RM/share) 1.53

P/BV (x) 1.1

ROE (%) 16.4

Net Gearing (%) 14.7

Major Shareholders Phin Sdn Bhd (36.2%)

Pang Tin (5.2%)

Phang Khang Hau (5.8%)

Free Float 34.4

Avg Daily Value (RMmil) 1.1

Price performance 3mth 6mth 12mth

Absolute (%) 18.5 51.8 26.3

Relative (%) 15.5 44.9 33.7

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Mar-11 Mar-12 Mar-13 Mar-14 Mar-15

KICB MK FBMKLCI Index

CONSTRUCTION

KIMLUN CORP (KICB MK EQUITY, KICB.KL) 11 Mar 2016

Wins RM1.5bil Pan Borneo job with Zecon

Company report BUY

Max Koh

[email protected]

03-2036 2299

(Maintained)

Rationale for report: Company update

Investment Highlights

We maintain BUY on Kimlun Corp Bhd with a lower fair

value of RM2.10/share (vs. RM2.28/share earlier) – pegged

at 11x FY16F PE.

Kimlun announced yesterday that it secured a RM1.46bil

Pan Borneo highway job with its partner Zecon Bhd. The

contract was awarded to a soon-to-be-incorporated JV

company and comprises development and upgrading of

the Pan Borneo highway from Serian roundabout to Pantu

Junction.

The duration of the contract is 48 months with estimated

completion in end-March 2020.

Kimlun’s wholly-owned subsidiary, Kimlun Sdn Bhd, will

hold a 30% stake in the JV company, while Zecon will hold

the majority 70%.

As such, we assume Kimlun’s portion of the contract

amounts to RM438mil. Assuming a PBT margin of 5%, the

contract should contribute ~RM5.5mil annually over five

years.

This is the first major job announced this year. Together

with RM273mil won earlier this year, Kimlun has secured

RM711mil worth of new jobs. This has surpassed our order

book replenishment of RM650mil. As such, we have scaled

up our construction order book target to RM900mil for

FY16F. Our manufacturing order book replenishment target

of RM250mil is maintained.

In a briefing yesterday, management said it is targeting

RM600mil-RM800mil worth of new jobs for this year

(excluding highway jobs) and RM100mil-RM120mil for its

manufacturing arm.

Recall that as at end-Dec, Kimlun had outstanding order

book of RM940mil and RM170mil for its construction and

manufacturing arms, respectively.

Kimlun’s current tender book for its construction arm is

~RM2bil (excluding highways). Prospective jobs include

Central Spine Road, and 8 tenders for DASH and SUKE.

As for its manufacturing arm, it is targeting to supply

products to KVMRT2; Eastern Region line and Thomson

line, and Deep Tunnel Sewerage System in Singapore.

Currently, its Senawang (600k MT p.a.) and Ulu Choh

plants (300k MT p.a.) are at 30% and 80% utilisation rate.

All in, we have tweaked up our order book target for FY16,

but reduced our PBT margin assumption to 8% (vs. 10%

earlier) and recognition assumptions given that a few of

its projects will only achieve strong billing recognitions

next year. Note that a majority of its outstanding order

book was secured in 2H15. Maintain BUY; it is currently

trading at 9x PE.

Kimlun Corp 11 Mar 2016

AmInvestment Bank Bhd 2

80% take-up rate for Hyve

Kimlun’s Hyve project (GDV: RM235mil) has achieved a

take-up rate of 80% as at end-Dec. Unbilled sales

amounted to RM11mil. The project will be completed by

April 2016 (96% completion as at end-Dec).

EXHIBIT 1: JOBS WIN FY11-FY16 YTD

Source: Company, AmInvestment Bank Bhd

Year Project Value Date ann Start End Duration Stake Client

(RM mil) (%)

2016 Pan Borneo Highw ay Serian roundabout to Pantu Junction (JV w ith Zecon)** 438.0 Mar-16 Mar-16 Mar-20 48 months 30 Lebuhray a Borneo Utara Sdn Bhd

Others 273.0

Total 711.0

** based on 30% stake of the JV company

2015 Building w orks for 89 factory units, JB 63.6 Jan-15 Jan-15 Dec-16 24 months 100 Tentu Teguh Sdn Bhd (UM Land)

Infra w orks for Phase 3 of Southern Industrial and Logistics Cluster, Nusajay a 47.0 Jan-15 Jan-15 Apr-16 16 months 100 UEM Land Bhd

Construction of afforbable apartments in JB 230.7 Jan-15 Jan-15 Aug-17 30 months 100 (Nusajay a Heights) UEM Sunrise Bhd

Building and infrastructure w orks for 2 blocks of apartments in JB 55.4 Jan-15 Feb-15 Jan-18 36 months 100 Dy nasty View Sdn Bhd (UM Land)

Building and infrastructure w orks for 57 units of houses in JB 25.6 Jan-15 Feb-15 Jun-16 16 months 100 Dy nasty View Sdn Bhd (UM Land)

Others 327.7

Total 750.0

2014 Thomson line package 54.0 Mar-14 Mar-14 Mar-17 36 months 100 Shanghai Tunnel Engineering Co Ltd

Others 270 n/a n/a n/a n/a n/a v arious

Total 324.0

2013 Apartments, JB, Johor 115.4 Dec-13 n/a Dec-14 n/a 100 Country View

Apartments & ancillary buildings, JB, Johor 70.5 Oct-13 n/a Oct-15 n/a 100 SP Setia

Earthworks, piling and structure works, JB 115.5 Sep-13 n/a Sep-14 n/a 100 IOI Properties

Serv ice apartments & offices, Puteri Harbour 210 Sep-13 n/a Mar-16 n/a 100 UEM Sunrise

Factories, JB, Johor 59 Aug-13 n/a Oct-14 n/a 100 Mah Sing

Serv iced apartments & ancillary buildings, JB, Johor 296.4 Aug-13 Aug-13 May -16 33 months 100 IOI Properties

Housing contract, Kulaijay a, Johor (268 units) 64.3 Apr-13 May -13 Jul-14 15 months 100 Keck Seng

Apartments & ancillary buildings, JB, Johor 87.7 Jan-13 Jan-13 Jan-15 2 y ears 100 SP Setia

Tunnel Lining Segment, East-West Transmission Cable Tunnel, Spore (SGD17.13mil)43.0 Jun-13 Jun-13 Mar-15 33 months 100 SK Engineering & Construction

Others 173.0 n/a n/a n/a n/a n/a v arious

Total 1,234.8

2012 Tunnel Lining Segment, Sg.Buloh-Kajang MRT 48.5 Jun-12 Jun-12 Jun-14 2 y ears 100.0 MMC-Gamuda JV

Apartments & ancillary buildings, Shah Alam, Selangor 148.5 May -12 Jun-12 Sep-14 27 months 100.0 Esquire Corner Sdn Bhd

Serv ice apartments & ancillary buildings, JB, Johor 114.7 Mar-12 Mar-12 Feb-14 23 months 100.0 SP Setia

244 units of houses, JB, Johor 36.9 Mar-12 Mar-12 Feb-14 23 months 100.0 Keck Seng

Apartments & ancillary buildings, JB, Johor 68.3 Mar-12 Mar-12 Dec-14 21 months 100.0 UM Land

Alteration & ex tension of Sutera Mall, JB, Johor 72.0 Feb-12 Feb-12 Nov -12 10 months 100.0 Tanah Sutera Dev elopment Sdn Bhd

Supply of SBG, Sg.Buloh-Kajang MRT 223.2 Feb-12 Mar-12 Jul-15 40 months 100.0 MRT Corp

Serv ice apartments & ancillary buildings (2 blocks), Plentong, JB, Johor 82.1 Jan-12 Feb-12 May -14 27 months 100.0 IJM Land

Total 794.2

2011 Golden Sands Seav iew Residence Suites, Iskandar Malay sia, Johor 68.0 Nov -11 Dec-11 Jan-14 25 months 100.0 Grand Action Sdn Bhd

Mall of Medini, Medini, Iskandar Malay sia, Johor 51.0 Sep-11 Sep-11 Jul-12 9 months 100.0 Nusajay a Lifesty le Sdn Bhd

65 units of houses and ancillary buildings, Shah Alam, Selangor 47.0 Aug-11 Aug-11 Aug-12 1 y ear 100.0 Melati Ehsan

300 units of low cost houses & ancillary buildings (IBS), Hulu Selangor, Selangor 31.0 Aug-11 Aug-11 May -12 9 months 100.0 Melati Ehsan

140 units of houses, Plentong, JB, Johor 28.5 Aug-11 Aug-11 Dec-12 16 months 100.0 Melati Ehsan

116 units of houses (IBS), Pulai, JB, Johor 54.4 Aug-11 Aug-11 Aug-13 2 y ears 100.0 Tanah Sutera Dev elopment Sdn Bhd

Total 279.9



EXHIBIT 2: PB BAND CHART EXHIBIT 3: PE BAND CHART

+1δ

Avg

-1δ

0.00

0.50

1.00

1.50

2.00

2.50

+1δ

Avg

-1δ

0.00

5.00

10.00

15.00

20.00

25.00



EXHIBIT 4: FINANCIAL DATA

Income Statement (RMmil, YE 31 Dec) FY14 FY15 FY16F FY17F FY18F

Revenue 1,206.4 1,053.6 984.8 1,079.7 1,033.9

EBITDA 90.5 104.6 98.5 109.9 103.8

Depreciation/Amortisation (24.6) (20.9) (19.6) (20.7) (21.9)

Operating income (EBIT) 65.9 83.8 78.9 89.1 82.0

Other income & associates 4.7 9.2 7.8 7.8 7.8

Net interest (10.7) 0.4 1.7 2.5 3.3

Exceptional items - - - - -

Pretax profit 59.8 93.4 88.4 99.4 93.0

Taxation (15.2) (22.7) (19.4) (20.0) (17.5)

Minorities/pref dividends - - - - -

Net profit 44.6 70.7 69.0 79.4 75.6

Core net profit 33.8 70.7 69.0 79.4 75.6

Balance Sheet (RMmil, YE 31 Dec) FY14 FY15 FY16F FY17F FY18F

Fixed assets 160.9 151.8 150.4 144.6 137.8

Intangible assets - - - - -

Other long-term assets 9.6 13.4 23.7 31.5 39.3

Total non-current assets 170.5 165.1 174.1 176.1 177.0

Cash & equivalent 84.7 96.8 80.9 50.3 25.6

Stock 21.1 21.5 21.2 25.8 22.5

Trade debtors 349.4 444.9 404.7 443.7 453.2

Other current assets 265.2 244.9 244.9 244.9 244.9

Total current assets 720.4 808.1 751.7 764.6 746.2

Trade creditors 315.0 301.3 259.1 232.0 174.8

Short-term borrowings 111.2 101.8 55.8 40.0 24.6

Other current liabilities 14.4 47.7 47.7 47.7 47.7

Total current liabilities 440.6 450.8 362.5 319.7 247.1

Long-term borrowings 49.8 62.7 51.9 50.7 50.7

Other long-term liabilities - - - - -

Total long-term liabilities 49.8 62.7 51.9 50.7 50.7

Shareholders’ funds 400.5 459.7 511.3 570.3 625.4

Minority interests - - - - -

BV/share (RM) 1.33 1.53 1.70 1.90 2.08

Cash Flow (RMmil, YE 31 Dec) FY14 FY15 FY16F FY17F FY18F

Pretax profit 59.8 93.4 88.4 99.4 93.0

Depreciation/Amortisation 24.6 20.9 19.6 20.7 21.9

Net change in working capital 53.0 (204.7) (1.8) (70.7) (63.4)

Others (62.7) 121.9 (36.0) (27.8) (25.3)

Cash flow from operations 74.8 31.4 70.3 21.7 26.2

Capital expenditure (18.3) (11.9) (15.0) (15.0) (15.0)

Net investments & sale of fixed assets 0.2 0.2 - - -

Others - - - - -

Cash flow from investing (18.1) (11.7) (15.0) (15.0) (15.0)

Debt raised/(repaid) (19.4) (25.1) (18.5) (16.9) (15.5)

Equity raised/(repaid) 66.1 - - - -

Dividends paid (9.0) (11.4) (17.4) (20.4) (20.4)

Others (24.5) - - - -

Cash flow from financing 13.2 (36.5) (36.0) (37.3) (35.9)

Net cash flow 69.8 (16.9) 19.3 (30.7) (24.7)

Net cash/(debt) b/f 8.1 78.1 61.6 80.9 50.3

Net cash/(debt) c/f 78.1 61.6 80.9 50.3 25.6

Key Ratios (YE 31 Dec) FY14 FY15 FY16F FY17F FY18F

Revenue growth (%) 27.4 (12.7) (6.5) 9.6 (4.2)

EBITDA growth (%) 33.1 15.6 (5.8) 11.5 (5.5)

Pretax margin (%) 5.0 8.9 9.0 9.2 9.0

Net profit margin (%) 3.7 6.7 7.0 7.4 7.3

Interest cover (x) 6.1 nm nm nm nm

Effective tax rate (%) 25.5 24.3 22.0 20.1 18.8

Dividend payout (%) 25.6 24.7 29.6 25.7 27.1

Debtors turnover (days) 106 138 157 143 158

Stock turnover (days) 6 7 8 8 9

Creditors turnover (days) 94 107 104 83 72

Source: Company, AmInvestment Bank Bhd estimates



Published by

AmInvestment Bank Bhd (23742-V) (A member of the Am Bank Group) 15 t h F l oo r B a ng un an A m B ank G r ou p 55 Jalan Raja Chulan 50200 Kuala Lumpur Tel: ( 03 ) 207 0 - 2 44 4 ( r e s ea r c h ) F ax : ( 03 ) 207 8 - 3 16 2

Printed by

AmInvestment Bank Bhd (23742-V) (A member of the AmBank Group) 15 t h F l oo r B a ng un an A m B ank G r ou p 55 Jalan Raja Chulan 50200 Kuala Lumpur Tel: ( 03 ) 207 0 - 2 44 4 ( r e s ea r c h ) F ax : ( 03 ) 207 8 - 3 16 2

The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this

report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a

solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd may from time to time have a position in or with

the securities mentioned herein. Members of the AmBank Group and their affiliates may provide services to any company and affiliates of

such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are

reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not

represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise

from the use of this report. All opinions and estimates included in this report constitute our judgement as of this date and are subject to

change without notice.

For AmInvestment Bank Bhd

Benny Chew

SR VP Equity Research

Documents

Kimlun Corporation