Kimlun's earnings forecast trimmed

PETALING JAYA: Analysts have cut their earnings forecast for Kimlun Corp Bhd for the financial years ended Dec 31, 2017 (FY17) and 2018 (FY18), following the group’s cautious guidance for its earnings outlook during an analyst briefing last Thursday.

In a note last Friday, AmInvestment Bank said it has cut its FY17 and FY18 forecasts by 18% and 3% respectively, and downgraded its fair value by 10% to RM2.40, from RM2.65 previously, but maintained its “buy” call for the group.

The research house said Kimlun has guided for weaker earnings in FY17 against FY16, following a high base in FY16 due to lumpy variation order claims recognised during Q4, that had effectively inflated the overall construction margins and earnings, which is unlikely to recur in FY17.

Furthermore, AmInvestment said the management believes that there is a potential timing gap for the group to ramp up production to fill the newly secured orders, including those from MRT2 and Eastern Region Line in Singapore.

Nevertheless, AmInvestment said Kimlun is a good proxy to the booming local construction sector given its involvement in the MRT2 (supply of precast concrete segments), Pan Borneo Highway and the construction of affordable housing.

On a separate note, HLIB Research said it has reduced Kimlun’s FY17-18 earnings forecasts by 6% and 4% respectively, after imputing normalisation of construction margins and potential timing gap for manufacturing. HLIB Research downgraded its rating on Kimlun from “buy” to “hold”, with a lower target price of RM2.27 from RM2.66 previously.