KUALA LUMPUR: Kimlun Corp Bhd's construction and precast margins could see sequential expansion going forward, said Hong Leong Investment Bank Bhd (HLIB Research).
The research house said the contribution from Kimlun's new projects has increased and should continue picking up next year, led by its Sarawak-Sabah Link Road (SSLR) contract.
"Kimlun is guiding for stable to slightly improving construction margins going forward given the weakening trend of steel prices.
"Nonetheless, cement prices have started rebounding to a year high in November 2022, thus putting a lid on the potential margin improvements," it said.
The bank-backed research firm said Kimlun's outstanding orderbook amounts to RM1.39 billion, translating to a decent 2.8-times cover.
Meanwhile, HLIB Research said a shortfall of RM300 million on construction wins could come in early 2023.
"Part of this shortfall will likely roll forward to early next year, where we believe it will comprise private-sector jobs.
"The existing tender book ranges between RM800 and RM900 million, comprising private sector jobs. Kimlun has conservatively excluded public sector projects amidst the changes post-GE15.
"Several notable projects Kimlun intends to participate in are Kuching ART, Pan Borneo Highway (PBH) Phase 2, The Mass Rapid Transit 3 (MRT 3) and Johor Bahru–Singapore Rapid Transit System (RTS)," it said.
In addition, HLIB Research said Kimlun is also guiding the required labour supply to normalise by March 2023.
The firm said Kimlun does not envisage a need to top up, considering current orderbook levels.
"Reading from pre-GE15 parliamentary remarks, the new government will place solving the foreign worker shortage as a key priority going into 2023.
"No change to forecasts on Kimlun. Maintain Buy with an unchanged target price of 85 sen," it added.