This article first appeared in The Edge Financial Daily, on March 4, 2016.
Kimlun Corp Bhd (-ve)
SHARES of Johor-based construction company Kimlun (fundamental: 1.7/3, valuation: 1.8/3) rose 4 sen or 2.52% to close at RM1.63 after it released a strong set of 4QFY15 results last Thursday. The stock has risen 25.2% over the past one year. Its market capitalisation stood at RM486.9 million.
For 4QFY15, revenue declined 16.1% year-on-year to RM231.9 million, largely due to a 24% drop in construction revenue. Net profit, however, more than doubled to RM21.4 million, mainly due to better gross profit margin derived by the construction and manufacturing divisions.
Concurrently, Kimlun proposed a higher final dividend of 5.8 sen per share for 2015 versus 3.8 sen per share for 2014, subject to shareholders’ approval at the forthcoming annual general meeting. Based on the current price, this translates into a dividend yield of 3.6%.
The company attributed the improved construction margin to the execution of better margin projects, lower raw material price and fuel price. Meanwhile, manufacturing division also achieved better margin, boosted by the execution of higher-margin tunnel lining segment and jacking pipes sales orders for the Singapore Thomson MRT line instead of lower-margin segmental box girders sales orders for Klang Valley MRT project as well as the stronger Singapore dollar against ringgit.
Stripping out the land disposal gains of RM10.8 million in 2014, net profit for the full year 2015 surged 109% year-on-year to RM70.7 million.
However, current outstanding construction and manufacturing orderbook decreased from RM1.42 billion a year ago to RM1.11 billion — just 1.06 times its 2015 construction and manufacturing revenue. Unbilled property sales stood at RM11 million, down from RM100 million a year ago.
Kimlun, a well-established building contractor and concrete products supplier, is seen as a cheaper proxy to major infrastructure projects in Iskandar Malaysia as well as MRT developments in Malaysia and Singapore. The stock currently trades at a trailing P/E of 6.8 times and 1.07 times its book value.
