Today, RHB analysts Eddy Do Wey Qing and Muhammad Danial Abd Razak wrote in a note that “we expect [Kimlun’s] earnings recovery to gain pace in 2HFY21 (the second half ending Dec 31, 2021)” as the research house stays cautiously optimistic about the company’s order book replenishment outlook.
“We upgrade to ‘buy’ on recent share price weakness (three months: -7.6%), and remain cautiously optimistic about contract replenishment opportunities ahead,” they said.
Yesterday, Kimlun reported that its net profit stood at RM2.38 million for the second quarter ended June 30, 2021 (2QFY21) versus a net loss of RM9.74 million a year earlier, while revenue rose to RM214.33 million from RM94 million.
For 1HFY21, Kimlun said its cumulative net profit stood at RM11.5 million, compared to a net loss of RM3.14 million a year earlier, while revenue was higher at RM424.61 million versus RM339.34 million.
Today, the RHB analysts said Kimlun’s 1HFY21 core net profit of RM9.3 million accounted for 34% and 29% of the full-year estimates of the research house and the street respectively.
Kimlun’s 1HFY21 core net profit “missed expectations”, they said.
“In deriving core net profit, we removed gains related to the disposal of quoted or unquoted investments or properties, as well as FX (foreign exchange) gains,” they said.
RHB cut its FY21 earnings forecast for Kimlun by 11% to factor in lower project profit margin assumptions due to idle cost during the Covid-19-driven lockdown period.
“Key downside risks: Margin erosion from intense competition, steep increases in raw material prices, lower rates of new contract flows and slower roll-outs of affordable housing projects,” the analysts said.
Meanwhile, Hong Leong Investment Bank Bhd (HLIB) analyst Edwin Woo said HLIB cut its earnings forecasts for Kimlun for FY21, FY22 and FY23 by 7%, 3% and 5.7% respectively after slashing its contract win and profit margin assumptions.
The research house maintained its “hold” call for Kimlun shares, with a lower TP of 84 sen from 86 sen previously.
Woo said Kimlun’s 1HFY21 core profit after tax and minority interest (PATAMI) or core net profit of RM11.5 million was below HLIB’s and consensus expectations at 38% and 36% of the full-year forecasts respectively.
On Bursa Malaysia today, Kimlun’s share price had fallen half a sen or 0.63% to 79 sen at 10.55am, valuing the group at about RM279.15 million.
The company has 353.36 million issued shares.
A glance at Kimlun’s year-to-date (YTD) share price chart showed that its share price had fallen to current levels from the highest closing price of 99 sen on April 16, 2021. -The Edge Markets