No surprises from Kimluns progress update
0 month ago, 11-Oct-2021
This comes as Kimlun’s outstanding construction orderbook amounts to a dwindling RM800 million lasting the next two years.
KUCHING: Analysts say there were no surprises at Kimlun Corporation Bhd’s (Kimlun) investor briefing last Friday as the engineering and construction services provider updates on its projects.
One such update is in its portion of the Pan Borneo Highway (PBH) Sarawak, which has achieved a progress of 90 per cent.
“We note that this progress rate is relatively unchanged from the rate divulged in its last briefing in April this year, implying difficult construction conditions, which we think is due to supply chain issues in addition to restrictions,” commented the team at Hong Leong Investment Bank Bhd (HLIB Research).
“Management has also indicated limited timeline visibility for PBH Phase 2 tenders. As such, Kimlun has tendered for other state infrastructure projects.”
This comes as Kimlun’s outstanding construction orderbook amounts to a dwindling RM800 million lasting the next two years. The group noted that contract replenishment has been challenging in 2021 — amounting to a mere RM20 million in the first half of financial year 2021 (1HFY21) and little indications of more achieved since.
“However, management has maintained its RM500 million construction contract replenishment guidance for FY21 despite slightly less than three months remaining. Some outstanding tenders are for hospital, infrastructure projects in Sarawak and private sector opportunities.
“Given the time constraint we have imputed a RM250m assumption in FY21 which could hinge on revival of private sector jobs on reopening. On the execution side, Kimlun has obtained approval from several clients to slow down construction progress in view of elevated material prices.
“This could slow down recognition vs. expectations increasing downside risks to earnings forecasts.”
Looking at Kimlun’s manufacturing department, its outstanding manufacturing orderbook stands at RM300 million. HLIB Research saw that orders for 1HFY21 came in at RM75 million against its assumptions of RM200 million orders in FY21.
“However, like construction, management has maintained its guidance of RM150 million to RM200 million for FY21,” it added. “In terms of contract opportunities, we do expect Kimlun to continue securing various project orders from Singapore and could also secure work from the upcoming Johor Baru-Singapore Rapid Transit System.
“Deliveries have also suffered in tandem with slower construction activities in Singapore due to various supply chain issues. We reckon current labour supply challenges will be slow to subside as mitigation is tricky amidst the ongoing virus spread.”
As for properties, Kimlun is aiming to launch 16 units of bungalows for Phase 2 Bukit Bayu and 60 units of semi-detached houses in Bandar Seri Alam fetching a total gross development value of RM98 million.
“Recognition should span a period of 24 months and we think could start next year.”