The Borneo Post

Concrete prospects for Kimlun as it eyes Kuching

Ronnie Teo

KUCHING: Works in Sarawak’s Autonomous Rapid Transit (ART), Pan Borneo Sarawak Highway (Phase 2), Iskandar Bus Rapid Transit (BRT) and Rapid Transit Systems (RTS) are among projects being eyed by constructor Kimlun Corporation Bhd (Kimlun).

This was on the back of strong performance of its manufacturing division in the newly-announced results for the third quarter of financial year 2022 (3QFY22), driven by internal orders for precast concrete products for a fast-track building job of a semiconductor plant in Penang for a US-based client.

Recall, in 3QFY22, the turnover and gross profit of its manufacturing division jumped 35 and 45 per cent sequentially, respectively. Historically, the manufacturing division contributes 40 per cent of Kimlin’s total gross profits.

“A new wave of investment in semiconductor foundries and data centres by MNCs in Malaysia has been a shot in the arm for local construction players, including Kimlun, commented analysts at Kenanga Investment Bank Bhd (Kenanga Research).

“The building jobs for these foundries and centres, typically fast-track in nature, fetch good margins. Kimlun is currently bidding for more such jobs in Penang and Johor.

“Meanwhile, demand for its precast products in Singapore remains robust underpinned by the construction of Singapore’s Cross Island MRT Line in which KIMLUN has secured two tunnel lining segment packages and is awaiting the tender results of another four packages.”

To recap, a bulk of Kimlun’s external manufacturing revenue is derived from Singapore which it has benefitted from the stronger Singaporean dollar exchange rate which lifted its manufacturing revenue by circa four per cent in 3QFY22.

Year to date, Kimlun has secured RM353 million worth of new jobs. However, it conceded that the chances of meeting its initial FY22 replenishment guidance of RM600 million to RM800 million (eyeing mainly private jobs) was slim as these awards will likely be deferred into 1QFY23.

“On the public projects front, the firm is cautiously optimistic that these projects would be rolled out under the new government administration but remain uncertain over the timing. “Kimlun has brought in 70 foreign workers out of a total of 737 approved for both its construction and manufacturing arms. The remaining workers from Indonesia, Bangladesh and Nepal ate targeted to come in gradually up until April 2023.

“With the gradual arrival of these workers, Kimlun will be able to expedite the delivery of its outstanding order book of RM1.74 billion as at end-September 2022.”

Additionally, a new employment act to come into effect on January 1, 2023 mandates the payment of overtime salaries to workers earning less a month salary of less than RM4,000 (previously RM2,500). Kenanga Research said this may slightly dent its bottom-line given that circa 10 per cent of its workers fall under this threshold.

The team with Hong Leong Investment Bank Bhd (HLIB Research) reiterated Kimlun’s management guiding for stable to slightly improving construction margins going forward given the weakening trend of steel prices.

“Nonetheless, cement prices have started rebounding to year high in November 2022, thus would put a lid on the potential margin improvements.

“On the replenishment side, management is unlikely to meet target of RM500m wins having only accomplished about RM200 million worth of contracts so far. Part of this shortfall is likely rolled forward to early next year where we believe would comprise of private sector jobs.

“Existing tenderbook ranges between RM800 million to RM900 million comprising of private sector jobs, Kimlun has conservatively excluded public sector projects amidst the changes post 15th General Elections.”

Business

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2022-12-06T08:00:00.0000000Z

2022-12-06T08:00:00.0000000Z

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