AmWatch - Kimlun Corporation : Wins another two contracts worth RM81mil HOLD, 4 Feb 2015

STOCK FOCUS OF THE DAY

Kimlun Corporation : Wins another two contracts worth RM81mil             HOLD

We maintain HOLD on Kimlun Corporation Bhd with an unchanged SOP-based fair value of RM1.45/share, which implies an FY15F PE of 10.5x. The group had secured two contracts last week from United Malayan Land Bhd’s (UMLand) subsidiary Dynasty View Sdn Bhd, worth a collective RM81mil. The first contract is for the building and infrastructure works for two blocks of apartments in Johor Bahru for RM55.4mil. The job is expected to be completed by Jan 2018. The second contract entails the building and infrastructure works for 57 units of houses in Johor Bahru for RM25.6mil. The job is expected to be completed by June 2016.

With the two latest wins, the group has secured RM422mil worth of new contracts for YTD FY15F. The group secured RM340mil worth of jobs earlier in January. This is positive considering the lull in new job wins last year (RM270mil; FY13: RM1.1bil). The new wins are consistent with management’s guidance that developers are moving towards launching affordable homes given the general property slowdown in the state.  We note that its recent jobs are mostly located in the Johor Bahru area.

Kimlun said in our recent meeting that it is bidding more actively for jobs this year. We estimate an outstanding order book of ~RM1.4bil and a tender book of ~RM400mil for the group currently. While the continued jobs flow is positive, we remain cautious given the general slowdown in Johor. We expect construction gross margin to stabilise at ~6% following the contraction from 11% in FY11. Margins for manufacturing should slightly improve as it completes delivery of segmental box girders for KVMRT2 in 1QFY15F. No changes to our numbers as the value of contracts secured are within our new order book assumption of RM600mil for FY15F.

Others :

TSH Resources : Slower FFB output growth in FY15F         HOLD

Banking Sector : Relatively stable trends in December stats (Stable Trends)                                          NEUTRAL

Banking Sector : Stable foreign holdings in MGS in December 2014 (MSG)                                             NEUTRAL

QUICK TAKE

Plantation Sector : Newsflow for week 26-30 January     NEUTRAL

NEWS HIGHLIGHTS

Eco World Development Group : To ink deal on RM8bil BBCC project

RHB Capital : Group hires new retail banking head

CIMB Group Holdings : Nazir gets Asia House award

Astro Malaysia Holdings : Targets RM500m annual revenue from home shopping

DISCLAIMER:

The information and opinions in this report were prepared by AmResearch Sdn Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmResearch Sdn Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmInvestment Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgement as of this date and are subject to change without notice.

CIMB Daily Fixed Income Commentary - 3 February 2015

Good Morning,

Market Roundup

• US Treasuries weakened with yields surging 8-13bps along the bellies and far end of the curve. There was reversal of safe haven flows as hopes increased of some resolution between the new Greece government and the EU. Earlier in January, there were fears that the new government would backtrack on austerity measures placing the debt aid from the EU to Greece at stake.
• As crude oil prices rose, the dollar fell against the Euro currency. EUR/USD was spotted at 1.1464 this morning versus opening at low of 1.1280 this week. Brent crude rose to as high as $59 per barrel before hovering now around $57.90. Also lifting the Euro were hopes of resolution between the new Greece government and Euro Zone partners. New Finance Minister Yanis Varoufakis was heard saying the government would no longer call on creditors to write off part of Greece’s €315 billion debt and would propose debt swaps, thus maintaining Greece on the debt program.
• End-month trading rebalancing boosted volume traded and gains along the Malaysian Government Bond market before the market goes off on long holiday weekend. Volume was heavier along benchmark papers with yields seen declining up to 7bps last Friday.
• Thai bonds came under moderate pressure with foreigners net selling a pretty small Bt316 million of bonds on Tuesday. Meanwhile, IRS rates moved sideways. Longer tenor swap rates rose 2-3bps though the 5-year rates came down 5bps on the day.
• IDR government bonds ended Tuesday with the yields down by 5-15 bps across the curve. The market kept trading up even though the government was holding the auction. We saw bidding interests from securities houses in the market before the auction opened. The demand for auction was still strong, with the government receiving IDR40.2 trillion of incoming bids with the most bids concentrated on FR71 (15-year bonds). The government accepted IDR16 trillion, upsized from initial target issuance IDR 12 trillion with aggressive yield was won at 6.96% for the 15-year paper. FR71 accounted for 35.6% of total issuance and bid to cover ratio was 3.02x.
• On Tuesday, Asian dollar credits saw a lack of interest as focus was on pipeline primary deals. IG spreads were mostly unchanged and saw little boost from overnight rally along the US equities markets. Two new offerings came from China-based Shimao Properties and Indonesia’s telecom company Tower Bersama.

Banking on success…

Rapids • Deals • News • Takaful • Asset Management • Ratings • Moves
4th February 2015 (Volume 12 Issue 05)
Banking on success… Despite the global volatility in oil prices, the outlook for 2015 looks surprisingly positive: with economic conditions improving and markets in the Middle East demonstrating unexpected resilience. As the financial sector surges forward on the back of sustained growth, we take a look this week at the compelling prospect for capital-raising in the region – with Tier 1 issuance the word that seems to be on everyone’s lips at the moment. IFN Managing Editor Lauren McAughtry talks to key market players to discover what we can expect for the year – and where/whom we can expect it from. Our IFN reports this week take you on a journey to Saudi Arabia under a new king and the UAE under new Takaful regulations, with a look at the global Sukuk market for 2015. Correspondents cover the Maldives, Africa, Turkey and real estate; while our analyses bring you the latest on Japan and technology. Special reports come to you from Tawreeq Holdings on SMEs and Oasis Financial Holdings on Canada as well as on a new banking charity scheme by the Royal Award for Islamic Finance recipient, Dr Abdul Halim; while our features this week focus on Jordan. As always, we wish you a productive week and a positive performance, and we hope you enjoy all the very latest news, features and analysis with which we have crammed our jam-packed issue this week. Cover Story Banking sector boom: Capital financing forges forward Bank financing is big news for 2015, as Basel III compliance, consistent growth and capital requirements push the financial sector further towards the fixed income markets to raise new capital and diversify their funding sources. The Middle East is seeing Tier 1 deals sprout up in all corners: with the UAE, Bahrain, Qatar, Kuwait, Oman and Saudi Arabia all expecting to tap the market over the next couple of quarters. LAUREN MCAUGHTRY talks to the industry. IFN Reports • Amid market concerns, Saudi Arabia is in a good position to ride out the storm • Halal hotels opening the door for Islamic finance • Equity volatility creates opportunity for Sukuk • Sovereign Sukuk: Gradual progress • European insurance model for the UAE • Malaysia plans to make Islamic finance a mandatory component for Halal certification • IFN Weekly Poll: On the back of its performance in 2014, will UAE's real estate sector continue to witness a downward trend this year? • Fund Focus: SICO Fixed Income Fund • IFN Global Trendswatch IFN Country Correspondents • Bank of Maldives introduces Islamic banking • Zorlu Enerji plans lease certificate issue • ISFIN analyzes Islamic finance opportunities IFN Sector Correspondent • Everything’s changing IFN Country Analysis • Japan: Revving its Islamic finance gears IFN Sector Analysis • Technology: Digital banking and beyond Case Study IBA’s largest Islamic facility to date The International Bank of Azerbaijan (IBA) last month successfully procured a US$252 million one-year Islamic financing facility. Securing the financing at a margin of 2.75% over LIBOR, the funds obtained will be channeled to IBA’s Islamic banking department for crediting Shariah compliant projects. Special Reports Foot in the door: Barriers to the banking industry Canadian citizens have long voiced their need for non-interest-bearing financial products and solutions. Islamic finance known as Shariah compliant banking which is recognized in Canada as one of the alternative financing means is the solution. When will Islamic finance make a difference for SMEs? For many years now the subject of how Islamic finance can assist small and medium-sized enterprises (SMEs) has been a hot topic. It is strongly argued that Islamic banks must be better than conventional banks at looking after the ‘little guy’, providing capital where capital is needed; not lending to those who do not need money, as the saying goes, but adding value and assisting those that employ the vast majority of people across the globe. New banking charity scheme to free the underprivileged in Asia from poverty 2014 was a remarkable year for Islamic finance as the industry achieved several milestones and continues to move towards greater sustainability and in providing a wider range of financial services. There is clearly a market with high potential within the Islamic economy. Feature Islamic banking in Jordan Ranked as one of the top 10 Islamic finance jurisdictions, Jordan is an interesting market despite its relatively small Islamic finance share. NAFITH NAZZAL walks us through the development of Islamic finance in Jordan. Islamic banking, ‘the next economic giant’, is banking or banking activity that is consistent with the principles of Islamic Shariah law and its practical application through the development of Islamic economics.  CONTACTS Editorial: Sasikala Thiagaraja Direct Line: +603 2163 7800 ext 34 Finance: Faizah Hassan Direct Line: +603 2162 7800 ext 26 Sales: Dubai: Geraldine Chan Direct Line: +971 4 427 3628 Kuala Lumpur: Steve Stubbs Direct Line: +603 2162 7800 ext 55 Subscriptions: Dubai: Mithun Gangolli Direct Line: +971 4 427 3638 Kuala Lumpur: Siti Amilia Amir Amzah Direct Line: +603 2162 7800 ext 27