KUALA LUMPUR (Aug 9): Hong Leong IB Research (HLIB Research) has maintained its "hold" rating on Kimlun Corporation Bhd and keeps its target price (TP) at RM1.66.
The research house said on Thursday that given the slowing in contract flows following the change in government post 14th general election (GE14), this led it to maintain its order book replenishment assumption for Kimlun at RM500 million for FY18.
HLIB Research also said the "hold" rating on Kimlun reflects its cautious stance over the slowing macro job flow outlook, despite Kimlun's valuation having turned to be "attractive" followed by the post GE14 sell-off.
"Although Kimlun is less involved with public infrastructure construction jobs relative to private sector jobs in the past, we reckon competition for private sector jobs will intensify going forward as other contractors start bidding more aggressively within this space," the research house added.
Year to date, Kimlun has secured two new construction contracts with a total value of RM198 million, the research house said.
"Going forward, manufacturing job wins are likely to be driven by the Deep Tunnel Sewerage Phase 2 (S$2.3 billion) project in Singapore which has already been awarded to five main contractors that Kimlun will bid from to supply precast tunnel segments," said HLIB Research.
"Its outstanding construction order book now stands at c.RM1.6 billion (assuming burn rate of RM200 million in 2Q18), translating to 1.8x cover on FY17 construction revenue," it added.
At 10.03am, Kimlun was traded unchanged at RM1.55, with a market capitalisation of RM500.23 million.