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Monday, February 29, 2016

Kimlun: Earnings improved

Results Update

For QE31/12/2015, Kimlun’s net profit rose 9% q-o-q or 134% y-o-y to RM21 million while revenue was down 4% q-o-q or 17% y-o-y to RM232 million.

Revenue dropped q-o-q due to lower revenue being achieved by the construction division, partly offset by the increase in revenue achieved by the manufacturing and trading divisions. The decline in construction revenue was mainly due to some of the older projects were completed in the preceding quarter, while new projects secured had  yet  to  reach  the  stage  of  active  execution  during  the  current  quarter.

PBT inched up marginally due to a higher gross profit recorded in the current quarter, on the back of improved gross profit margin of the construction and manufacturing divisions. Higher other income was achieved in the current quarter mainly due to higher interest income earned, and income from the provision of products shop drawing and lab test services to our customers. Share of profit of a joint venture was higher in the current quarter as compared to the preceding quarter due to relatively higher construction progress during the current quarter. All these more than offset increased selling and administrative expenses which was mainly due to higher human resource costs and lower foreign exchange gains in the current quarter.  


Table: Kimlun's last 12 quarters' P&L accounts


Chart 1: Kimlun's last 12 quarters' revenue, profits & profit margins

Valuation

Kimlun (closed at RM1.52 last Friday) is now trading at a PER of 9.5 times (based on last 4 quarters’ EPS of 16 sen). At this PER, Kimlun is deemed fairly traded.

Technical Outlook

Kimlun has broken above its intermediate downtrend line, R2-R2 at RM1.35 in December last year. It rallied to the horizontal line at RM1.65 and then corrected back to the horizontal line at RM1.50.


Chart 2: Kimlun's monthly chart as at Feb 26, 2016 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance, fair valuation & positive technical outlook, Kimlun could be a good stock for medium-term investment.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Kimlun.

5 comments:

InvestSmart said...

Hi Alex. Just wondering why Kimlun still within RM1.60 and RM1.75 since Kimlun obtained many contracts lately from MRT2, Borneo Highway and etc.?

Alex Lu said...

Hi InvestSmart

I believe Kimlun is a good stock. It may slide further to the uptrend line support at RM1.60-1.65.

InvestSmart said...

Hi Alex, thank you for your input. It drop from RM1.95 and then never recover back to previous high, is that mean TA not good?

Alex Lu said...

Hi InvestSmart

The decline is quite normal after a strong rally from RM1.10 in August 2015 to its recent high of RM1.95. If you like to take some profit, you can do that on rebound to RM1.85-1.90. Taking some profit is not a bad idea.

However, if the stock does not give you an opportunity to sell at a good price and it continue to decline, I would suggest holding onto the stock until it break below RM1.60. That's the break of the uptrend line which could lead to a downtrend.

Good luck!

InvestSmart said...

Hi Alex, thank you very much.

You explained well here.