Kimlun Corporation Berhad: Capturing Value with an Attractive Dividend Opportunity

Kimlun Corporation Berhad (KLSE:KIMLUN), a Malaysia-based construction and pre-cast concrete solutions provider, is poised to deliver its highest dividend in years, with an upcoming ex-dividend date on June 30, 2025. Investors have a narrow window to secure shares before this deadline to capture a 2.0 sen per share dividend, a 100% increase from its previous payouts since 2020. This article explores the strategic rationale for acting now, supported by the company's robust financial turnaround, growth catalysts, and undervalued stock, while weighing risks that warrant caution.

The Dividend Opportunity: A Strategic Catalyst

Kimlun's proposed final dividend of 2.0 sen per share marks a significant shift from its conservative 0.01 MYR dividend in recent years, signaling confidence in its financial health. With shares outstanding of 353.38 million, the total payout amounts to approximately MYR7.07 million, a manageable 14% of its FY2024 net profit of MYR50.78 million. This payout ratio underscores sustainable dividend coverage, particularly as the company's order books and revenue growth provide a solid foundation for future cash flows.

The ex-dividend date of June 30 creates urgency for investors. To qualify, shares must be purchased by June 27, 2025 (three business days before the ex-date). With the dividend yield currently at 1.92% (based on a stock price of MYR1.07), this represents an attractive return, especially amid Malaysia's low-interest-rate environment.

Sustainable Dividend Coverage: Backed by Strong Financials

Kimlun's dividend increase is underpinned by a dramatic turnaround in its financial performance. After years of losses, FY2024 revenue surged to MYR1.21 billion, a 42% jump from FY2023, driven by:
1. Contract Wins: A record RM2.17 billion in new construction projects, including high-rise residential developments and infrastructure works like the Senai-Desaru Expressway.
2. Pre-cast Concrete Division: Secured RM200 million in orders, including contributions to Singapore's MRT projects, diversifying revenue beyond Malaysia.

The company's construction order book of RM3.1 billion and manufacturing order book of RM300 million can sustain operations for 2–3 years, reducing execution risk. Additionally, a gross profit margin improvement to 8.2% (vs. 7.2% in 2023) highlights operational efficiency gains.

Valuation: Undervalued Relative to Peers and Growth Prospects

Kimlun's stock trades at a price-to-earnings (P/E) ratio of 7.6x, significantly below the construction sector average of 12–15x, suggesting it is undervalued. At its current price of MYR1.07, the stock offers a compelling entry point, especially if earnings grow further.

The dividend yield of 1.92% also compares favorably to Malaysia's 10-year government bond yield of 2.8%, making it an income-focused alternative with upside potential.

Risks to Consider

While Kimlun's dividend boost and growth catalysts are compelling, risks remain:
1. Industry Competition: Malaysia's construction sector is crowded, with players like Gamuda Berhad and YTL Corp vying for contracts.
2. Macroeconomic Factors: A slowdown in property demand or infrastructure spending could delay project timelines.
3. Dependency on Government Contracts: Over 50% of its order book relies on government-backed projects, such as the Johor-Singapore RTS. Policy shifts or funding delays could impact revenue.

Investment Thesis and Final Call

Kimlun presents a high-conviction opportunity for income investors willing to act quickly. The 2.0 sen dividend, supported by strong order books and improved margins, offers a 1.92% yield with upside potential as earnings stabilize. However, investors must weigh the risks of industry volatility and macroeconomic headwinds.

Action Items:
- Buy shares by June 27, 2025, to capture the dividend.
- Monitor FY2025 earnings updates for further dividend guidance.
- Track macroeconomic indicators like Malaysia's GDP growth and construction sector activity.

In a market hungry for yield, Kimlun's dividend increase and valuation discount make it a compelling pick—but investors must act swiftly.