Kimlun Corporation Berhad (KLSE:KIMLUN) Analysts Just Slashed This Year's Estimates

Today is shaping up negative for Kimlun Corporation Berhad (KLSE:KIMLUN) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Shares are up 6.1% to RM0.78 in the past week. We'd be curious to see if the downgrade is enough to reverse investor sentiment on the business.

After the downgrade, the consensus from Kimlun Corporation Berhad's five analysts is for revenues of RM775m in 2020, which would reflect an uneasy 11% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to plunge 25% to RM0.044 in the same period. Prior to this update, the analysts had been forecasting revenues of RM871m and earnings per share (EPS) of RM0.076 in 2020. Indeed, we can see that the analysts are a lot more bearish about Kimlun Corporation Berhad's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

Check out our latest analysis for Kimlun Corporation Berhad

Analysts made no major changes to their price target of RM0.91, suggesting the downgrades are not expected to have a long-term impact on Kimlun Corporation Berhad's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Kimlun Corporation Berhad, with the most bullish analyst valuing it at RM1.10 and the most bearish at RM0.75 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with the forecast 11% revenue decline a notable change from historical growth of 3.7% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 12% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Kimlun Corporation Berhad is expected to lag the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Kimlun Corporation Berhad. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Kimlun Corporation Berhad's revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Kimlun Corporation Berhad.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Kimlun Corporation Berhad's financials, such as its declining profit margins. For more information, you can click here to discover this and the 3 other risks we've identified.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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