Its location, timing of the projects and expertise in infrastructure and heavy engineering projects will provide the mid-sized contractor an edge. Kimlun is also eyeing the RM36 billion MRT project for Kuala Lumpur.
Kimlun executive director Chin Lian Hing said for the first half of this year, it had secured RM300 million in contracts, most of which are in Johor, and the target is RM600 million in contracts this year.
“We are bidding for RM500 million to RM600 million in projects including education institutions and housing projects in Kuala Lumpur and Iskandar Malaysia,” Chin told The Edge Financial Daily.
Kimlun’s three core businesses are manufacturing concrete products, buildings and infrastructure construction, and industrialised building systems (IBS).
Analysts estimated its outstanding order book of RM649 million as at April this year would provide the group with earnings visibility for the next 1½ years. However, this excludes RM82 million in contracts for the supply of concrete products.
Of the RM115.83 million, construction division accounted for RM107.17 million and concrete products RM8.66 million. Net profit was RM9.76 million. Gross profit margin was 13.82%.
For the current financial year ending Dec 31, 2010, analysts forecast net profit to come in at RM36 million and between RM38 million and RM40 million for FY11.
Chin said of the RM300 million contracts secured up to April this year, most of the jobs are in Johor.
“Our current projects being undertaken are residential, commercial and government buildings, and infrastructure. On average, the government sector accounts for 35% and the private sector 65%. We don’t want to be too dependent on one single customer,” said Chin.
Providing an update on Kimlun’s outlook, its chief executive officer Sim Tiang Liang said Iskandar Investment Bhd was expected to call for bids for RM2 billion worth of construction jobs including retail complexes, education premises and residential projects.
It is also eyeing the Medini project — an urban development project with gross development value (GDV) of more than US$20 billion (RM63.6 billion) over 15 years to 20 years.
Construction projects for Marlborugh College and 1Medini projects with total GDV of RM650 million are expected to be carried out and completed within the next two to three years.
Other projects include six buildings under the 10th Malaysia Plan (10MP) to house federal departments and agencies in Kota Iskandar, a high-end shopping complex, a theme park and hotels.
Sim said Kimlun has been able to fast-track the building of 1,500 apartments in Nusajaya, Johor for Iskandar Regional Development Authority. The RM142.8 million project started in October 2009 and is targeted to be completed by January 2011.
“Kimlun was able to leverage on its IBS to manufacture the precast walls used in assembling the apartments within the 16-month contract period,” he said.
The advantage with IBS projects is a shorter construction period and the construction schedule is less affected by adverse weather. While it is less labour intensive, it also ensures better quality control, he said.
On Singapore’s MRT rail network extension, Kimlun’s unit SPC Industries Sdn Bhd executive director Loh Chew Lon said Kimlun was eyeing the proposal to extend the network on the island nation by 138.2km at end-2008 to 278km by 2020.
SPC manufactures the tunnel lining for the MRT and Kimlun had undertaken eight packages worth S$48 million (RM111.95 million) up to April 30, 2010.
According to industry players, about S$50 billion worth of rail lines for the MRT and complex expressway projects are expected to be tendered out over next the 10 years in Singapore.
Loh expects Singapore MRT to call for tenders for MRT Downtown Line 3 — covering 18 stations — between August and end-2010.
He said the experience in providing the tunnel lining should put it in good stead to tender for jobs under the proposed massive MRT project planned for Kuala Lumpur.
Other projects it is bidding are the sewerage scheme for Jurong Eastern Catchment scheme which requires the 0.5m to 3m diameter pipes.
“We are also bidding for Singapore’s project to extend the new water transmission mains to Jurong Island, which includes concrete cladding for the steel pipes,” Loh said.
Kimlun is building a RM5 million plant next to its current factory in Johor to manufacture spun piles. The project would be financed from the proceeds from its listing exercise.
This will enable it to diversify into heavy foundation projects for waterfront and marina developments in the southern region of Malaysia and Singapore.
As for the KL MRT, Sim said Kimlun hopes to be a supplier for the MRT’s tunnel segment as well as a builder for the station and infrastructure works.
The Public Transport Commission chairman Datuk Seri Syed Hamid Albar had said a feasibility study on a proposed MRT system would be completed in September. The commission will take a look at the three-month study and submit it to the government, which will decide on the proposal.
CIMB Research said the project value of RM36 billion for the MRT (excluding rolling stock and other components) makes it the biggest project for the sector so far and a handful of contractors stand to gain.
It said Gamuda is vying for the RM13 billion to RM14 billion tunnelling portion while the RM25 billion balance of works will be tendered out to local players. The fact that the MRT proposal was one of the deliverables of 10MP reinforces the importance of this project, added the research house.
Sim said Kuala Lumpur needs a comprehensive and integrated massive transport system such as the MRT based on the population.
“It is viable technically as the system is practised in many big cities and it becomes a necessity now if there is financial support. It is economically viable as it enhances the city status and infrastructure to attract investors and add value to the properties of the city. Kimlun can be a supplier for the tunnel segment and as well as a builder for the stations and infrastructure,” he said.
However, Sim said the implementation of the MRT would hinge on the financing. If there are sufficient funds, the construction can be divided into packages and be implemented simultaneously.
“By doing so, the time frame can be shortened. Five years look like a reasonably short time frame,” he said.
This article appeared in The Edge Financial Daily, August 17, 2010.
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