PP 7767/09/2010(025354)

Malaysia RHB Research

Institute Sdn Bhd
A member of the
New Listing RHB Banking Group
Company No: 233327 -M

Kimlun Corp 25 June 2010

MARKET DATELINE

Offer Price : RM0.97

Public Issue of 64m New Shares & Offer For Sale Of 11.3m
Fair Value : RM1.24
Existing Shares

Table 1: Investment Statistics Bloomberg Ticker: KICB MK

Net EPS Net
FYE Turnover Profit EPS Growth PER P/NTA Gearing ROE GDY
Dec (RMm) (RMm) (sen) (%) (x) (x) (x) (%) (%)
2009 435.4 31.5 13.8 42.0 9.0 1.85 - 20.5 -
2010f 459.0 32.9 14.4 4.4 8.6 1.61 - 21.4 3.5
2011f 495.0 35.6 15.5 8.2 8.0 1.41 - 20.2 3.8
2012f 510.0 36.1 15.8 1.4 7.9 1.25 - 17.9 3.8
Issued capital (m shares) 229.0 Major shareholder (%)
Market capitalisation (RMm) 248.0 Pang Tin @ Pang Yon Tin 40.4
Main Market Listing /Non-Trustee Stock/Syariah Approved Stock By The SC

Valuations based on estimated fair value of RM1.24/share

X Kimlun Corp Bhd (Kimlun) is primarily engaged in: (1) LISTING DETAILS

Construction (largely building jobs and minor infrastructure jobs Listing Sought Main Market of Bursa
Malaysia
such as roads and flyovers); and (2) Manufacturing of pre-cast
Listing Date 29 June 2010
concrete products such as tunnel lining segments. For FY12/09, Sector Construction
construction and manufacturing contributed 78.6% and 21.4% to Tax Resident Malaysia
total gross profit respectively. In terms of geographical Public Issue 1) 11.5m shares to the
Malaysian public
breakdown, in FY12/09, Kimlun derived 91% of its revenues from
2) 1.5m shares to
Malaysia with the balance 9% from Singapore. employees and business
associates
X Since FY12/07, the construction division has completed RM1.06bn 3) 33.1m shares to selected
investors via private
worth of projects (see Table 1). At present, its outstanding
placement
construction orderbook stands at RM650m (see Table 2). Kimlun 4) 18.0m to Bumiputera
is bidding for about RM900m worth of new construction jobs at investors approved by
present. MITI via private
placement
Offer For Sale Of
X For the manufacturing division, cumulatively over the last three 1) 0.4m shares to eligible
years, it managed to clock up RM168m worth of sales (see Table directors of the group
3), including orders for tunnel lining segments from contractors of 2) 5.5m to selected
investors via private
the Singapore MRT Circle Lines project worth S$14.4m (RM33.6).
placement
At present, its order backlog stands at RM97.1m (see Table 4). 3) 5.5m to Bumiputera
Kimlun is bidding for about RM75m worth of new orders for this investors approved by
division at present. MITI via private
placement

X We are Neutral on the construction sector. On one hand, we MAJOR SUBSIDIARIES

foresee improved investors risk appetite for construction stocks Kimlun Sdn Bhd 100%
following: (1) The massive underperformance of the sector vis-à- SPC Industries Sdn Bhd 100%
vis the market in 4Q2009 and 1H2010; and (2) A better sector i-Buildtech Solutions Pte 100%
Ltd
news flow and new expectations on the heels of the recent
announcement of the 10th Malaysia Plan (10 MP). On the other MANAGEMENT FORECAST
hand, certain negative elements remain such as: (1) The still slow FY12/10
pace of the roll-out of public projects, a highly competitive market Net Earnings (RMm) na
and declining dominance of established players in large-scale Net EPS (sen) na

projects locally; and (2) The not-so-rosy outlook and increased Net DPS (sen) na

operating risks in key overseas markets (following the Dubai credit

crisis, Dong’s devaluation and rising arbitration cases).
Joshua Ng
(603) 92802641
Please read important disclosures at the end of this report.
joshuang@rhb.com.my

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 24 June 2010

Table 1: Completed Construction Projects Over The Last Three Years

Value
Project Client
(RMm)
Construction of shopping complex in Ulu Langat, Selangor Bayu Melati Sdn Bhd 39.3

Construction of shopping complex on part of Section 11, Kota Damansara Bayu Melati Sdn Bhd 37.5

Design and build, testing and commissioning of a shopping complex with infrastructure
WCT Construction Sdn Bhd 35.0
works in Mukim Pulai, JB
Venice View Development Sdn
Construction of 438 units of double storey houses in Sierra Perdana, Mukim Pulai JB 33.1
Bhd (Mah Sing)
Construction of 398 units of apartments and townhouses in Bandar Seri Alam, Mukim
Seri Alam Properties Sdn Bhd 22.6
Plentong, JB

Construction of 70 units of semi-detached houses in Shah Alam, Selangor Esquire Corner Sdn Bhd 22.4

Venice View Development Sdn

Construction of 371 units of link houses at Sierra Perdana, JB 22.4
Bhd (Mah Sing)
Construction of 260 units of link houses at Bandar Seri Alam, JB Seri Alam Properties Sdn Bhd 25.6
Construction of 154 units of terrace houses in Mukim Pulai, JB Mutiara Rini Sdn Bhd 23.9
Construction of 3 elevated U-turn bridges and 4 elevated pedestrian bridges for the
Setia Precast Sdn Bhd 71.0
road upgrading of the JB-Pasir Gudang Highway
Others (below RM20m in value) Various 727.3
Total 1,060
Source: Company

Table 2: Outstanding Construction Orderbook

Value
Project Client
(RMm)

1,500 units of apartment in Bandar Nusajaya, JB Iskandar Regional Development Authority 97.4

2,720 units of low cost apartments, 51 units of commercial

Tebrau Bay Constructions Sdn Bhd 117.6
properties and other ancillary buildings in Mukim Pulai, JB

172 units of apartments and other ancillary buildings in Bandar

UEM Land Bhd 37.2
Nusajaya, JB

Construction of elevated interchanges along JB Inner Ring Road SJIC Bina Sdn Bhd 72.1

Others 325.7
Total 650.0
Source: Company

Table 3: Concluded Sales Of The Manufacturing Division Over The Last Three Years
Project Client Value (RMm)
Pre-cast concrete tunnel lining segments for Singapore MRT WH-STEC-AM-JV and Construction Technology Pte Ltd 33.5
Circle Line
Pre-cast components for an industrial building in Singapore CES-Precast Pte Ltd 19.4

Pre-cast concrete jacking pipes for Deep Tunnel Sewerage Tiong Seng Contractors Pte Ltd 8.8
Scheme Seleter Link sewer Contract 1
Pre-cast concrete cladding pipes for the laying of submarine JAKS Sdn Bhd 11.0
pipes from Loji to Labuan
Others (below RM3m in value) Various 95.7

Total 168.4
Source: Company

KIMLUN 2 CORP
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 24 June 2010

Table 4: The Manufacturing Division’s Order Backlog

Project Client Value
(RMm)
Pre-concrete tunnel lining segments for Singapore MRT Shimizu, Shanghai Tunnel Eng Co Ltd, SK 85.5
Downtown Line Engineering & Construction, McConnel Dowell
SEA and ALPINE Bau GmbH
Pre-cast concrete building components to Oasis @ Elias CES-Precast Pte Ltd 5.3
Condo
Pre-stress planks to Punggol Regalia CES-Precast Pte Ltd 6.3

Total 97.1
Source: Company

X We believe the growth prospects of Kimlun’s construction division are slightly better than the industry as
its key focus is on building jobs for private property developers locally. Also, Kimlun holds the competitive
edge via its expertise in Industrialised Building Systems (IBS), where basically pre-cast building
components are brought in and assembled into structures on the site, like the LEGO blocks game. While
this construction method is relatively new in Malaysia, it has been widely used in developed countries such
as the US and those in Europe. The key advantages of IBS are shorter construction time (and hence
lower risk on cost escalation) and reduced labour input. In terms of speediness in completion, for
instance, Kimlun expects to complete 1,500 units of apartments in Nusajaya in 15 months vis-à-vis 24
months via the conventional construction method.

X The growth potential of Kimlun’s manufacturing division is strong, underpinned largely by the order
backlog of S$36.7m (RM85.5m) for tunnel lining segments from contractors of the Singapore MRT
Downtown Line project. The prospects for more orders for tunnel lining segments from Singapore are good
as the MRT expansion plan in Singapore is expected to last until 2020 with the addition of two new lines,
i.e. the Downtown Line and the Eastern Region Line.

X At the helm of the company is CEO and executive director Mr Sim Tian Liang who has had more than 30
years of experience in construction project management. He is an engineer by profession and also the
Deputy President of Johor Master Builders Association.

X At the offer price of RM0.97, the IPO will raise RM62.1m gross proceeds (see Table 5 for IPO proceeds
utilisation). Post-IPO, the company is estimated to be in a net cash of RM70.7m.

X We project Kimlun’s net profits to grow by 1-8% per annum in FY12/10-12, driven largely by the
expansion at its manufacturing division. Indicative fair value is RM1.24 based on 8x FY12/11 EPS of 15.5
sen, at a discount to our benchmark 1-year forward target PER for the construction sector of 10-14x to
reflect Kimlun’s relatively small market capitalisation.

Table 5: Utilisation Of Gross IPO Proceeds

RM m
Construction of factories & purchase of PPE 35.9
Purchase of industrial land 5.2
Working capital 17.0
Listing expenses 4.0
Total 62.1

KIMLUN 3 CORP

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 24 June 2010

Table 6 : Earnings And Forecasts

FYE Dec
2007 2008 2009 2010f 2011f 2012f
Turnover 366.3 413.3 435.4 459.0 495.0 510.0
construction 318.7 350.8 390.6 410.0 430.0 450.0
manufacturing 49.4 68.3 50.7 55.0 70.0 65.0
intersegment -1.9 -5.8 -6.0 -6.0 -5.0 -5.0
cost of sales -318.9 -366.4 -374.3 -396.0 -429.0 -442.0
Gross Profit 47.4 46.8 61.1 63.0 66.0 68.0
construction 37.2 28.8 48.0 49.0 48.0 52.0
manufacturing 10.1 18.0 13.1 14.0 18.0 16.0
other operating income 1.2 1.1 1.4 1.2 1.3 1.2
selling and admin exp -12.6 -15.9 -17.3 -17.0 -17.5 -18.0
EBIT 36.0 32.0 45.2 47.2 49.8 51.2
finance cost -2.2 -2.8 -2.4 -2.3 -2.2 -2.1
pbt 33.8 29.2 42.8 44.9 47.6 49.1
taxation -8.0 -7.0 -11.3 -12.0 -12.0 -13.0
pat 25.8 22.2 31.5 32.9 35.6 36.1
Chg (%) - -14.0 42.0 4.4 8.2 1.4
EPS (sen) 11.3 9.7 13.8 14.4 15.5 15.8
Chg (%) - -14.0 42.0 4.4 8.2 1.4
PER (x) 11.0 12.8 9.0 8.6 8.0 7.9
Gross dividend per share (sen) - - - 4.3 4.7 4.7
Gross dividend yield (%) - - - 3.5 3.8 3.8
Valuations based on estimated fair value of RM1.24/share

KIMLUN 4 CORP

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 24 June 2010
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KIMLUN 5 CORP

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 24 June 2010

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