For new projects secured, the rising building material costs have already been factored in, says AmInvest 

by ANIS HAZIM / Pic credit: kimlun.com

AMINVESTMENT Bank Bhd (AmInvest) foresees Kimlun Corp Bhd’s earnings outlook to improve in its financial year of 2022 (FY22F) on the back of unbilled progress billings from projects secured in FY21. 

Despite the rising building material costs, AmInvest stated Kimlun has not been affected much. 

“Most of the older projects it is working on had already passed the steel and concrete intensive stage such as the structural stage. 

“For new projects secured, the rising building material costs have already been factored in,” AmInvest stated in a research note on the construction company on Monday. 

The reopening of Singapore also bodes well for Kimlun as construction activities are normalising and labour shortage issues are being resolved. 

Kimlun’s outstanding orderbook stands at RM2.1 billion, comprising RM1.7 billion for construction and RM0.4 billion for manufacturing, the investment bank stated. 

Kimlun has replenished its construction orderbook by RM1.1 billion in FY21, with a notable project win was the Sarawak-Sabah Link Road project (Lawas-Long Lopeng junction) worth RM780 million. 

“We forecast a replenishment of RM550 million in FY22F and RM600 million in FY23F. Potential contracts include Phase 2 of the Pan Borneo Highway, Autonomous Rapid Transit Sarawak and the Johor-Singapore Rapid Transit System,” it noted. 

Kimlun has secured RM160 million worth of sales orders for its manufacturing segment in FY21, mainly from the supply of precast components to Singapore’s Mass Rapid Train (MRT) train centre. 

“We forecast a replenishment of RM100 million in FY22F and RM120 million in FY23F, which could stem from the expansion of the rail network in Singapore,” AmInvest added. 

Kimlun is also expected to benefit from the construction of the MRT3 project where contracts are envisaged to be awarded in FY23F. 

The company has also bagged the supply contract for the tunnel lining segment and segmental box girder worth RM272 million for the MRT1 and RM253 million contract for the MRT2. 

Nevertheless, AmInvest maintained a ‘Hold’ on Kimlun with a higher fair value of 88 sen per share, while raising its FY22F net profit forecast for Kimlun by 19% and FY23F by 4%. 

The challenges faced by Kimlun include the escalation or prolonged Ukraine-Russia conflict leading to a supply chain disruption and rising building material costs that could delay or shelve megaprojects and labour supply issues.