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.