KUCHING (July 26): Kimlun Corporation Bhd (Kimlun) will likely see its second half (2H) earnings pick up when its key project, namely, the Sabah-Sarawak Link Road worth RM780 million moves up the S-curve.
This comes as the acute labour shortage in the industry has held players such as Kimlun back from bidding for new jobs aggressively, commented analysts with Kenanga Investment Bank Bhd (Kenanga Research), adding that they are awaiting government-to-government resolution.
“Kimlun has preference for Indonesian workers (versus those from Bangladesh and Vietnam) given that they are generally hard workers with higher skill levels,” it said in its analysis.
“Despite the reopening of the economy, the flow of contracts in the market has not picked up significantly. In the private sector space, Kimlun noticed that private developers are putting into the market smaller launches and skewed towards landed homes versus high-rise products.
“In the public sector space, tenders have yet to be called for Iskandar Bus Rapid Transit (BRT), Sarawak Autonomous Rapid Transit (ART) and Pan Borneo Highway Sarawak Phase 2.”
All these led Kenanga Research to expect Kimlun’s earnings for its second quarter (2Q) of financial year 2022 (FY22) to improve sequentially (from losses in 1QFY22 as it marked down expected margins for certain projects coupled with poor overhead absorption on weak progress billings).
This was while more significant improvement could come in 2HFY22 when its key project, namely, the Sabah-Sarawak Link Road moves up the S-curve.
Kimlun remains confident of meeting its orderbook replenishment target of RM600 million to RM800 million, including new manufacturing orders of RM100 million to RM120 million, it added.
“Year to date, Kimlun has secured circa RM200 million worth of new jobs,” it said. “It is in a good position to garner a slice of action in the Johor Bahru – Singapore Rapid Transit System (RTS) project, such as the supply of precast concrete segments, given the proximity of its plant in Ulu Choh, Johor.
“Thus far, Ekovest and Gadang have already won work packages from the project.
“We maintain our forecasts and FY22 orderbook replenishment of RM800 million for Kimlun.
As at end-March 2022, its outstanding orderbook stood at RM2.01 billion, which is fairly close to the peak of RM2.4 billion in FY17.
“We like Kimlun for the improved sentiment on construction stocks as the government is expected to expedite the rollout of public projects ahead of the GE15; its geographically diversified earnings base with a strong presence in the precast concrete product segment in Singapore; and its strong earnings visibility backed by an outstanding orderbook of RM2 billion which could keep it busy for the next two years.”
Sumber: The Borneo Post