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Wednesday, January 15, 2014

Lian Beng - Outlook Remains Positive


LBG's 2QFY14 PATAMI was 8.2% higher y-o-y, on the back of a 35.4% yo-y revenue growth driven by the construction segment,  despite  higher operating  expenses  and  losses  from  associates.  Going  forward, revenue  growth  is  likely  to  be  fuelled  by  Singapore's  construction demand,  although  PATAMI  growth  may  be  dampened  by  higher operating expenses. Maintain BUY and SGD0.70 TP.
  • Construction  demand  to  support  revenue  growth.  LBG  has  an established track record in both the public and private sectors. Given that the  Singapore  Government  has  a  healthy  pipeline  of  construction projects over  the next few years, LBG is likely to be able to secure more new contracts.  This, coupled with its strong orderbook of SGD1.0bn that is expected to last till 2016, LBG is in a good position to benefit from the expected increase in construction demand.
  • M-Space  expected  to  obtain  TOP  in  3QFY14.  Once  its  industrial development M-Space obtains  the temporary occupation permit (TOP), this  would  boost  LBG's  profitability.  However,  PATAMI  growth  and margins would be somewhat dampened by higher distribution costs from its  property  development  projects.  Such  expenses  are  expected  to  be lower over the next few quarters, but margins are likely to remain under pressure y-o-y.
  • Stable  outlook.  Our  SGD0.70  TP  is  based  on 6x  FY14  earnings.  We expect LBG to dish out higher dividends in FY14, as it books profits from M-Space.  We like LBG for its strong orderbook  and track record, which will  continue  to  be  supported  by  heightening  construction  activities  in both the private and public sectors.

Financial Exhibits

Company Profile
Lian  Beng  is  one  of  Singapore's  major  home-grown  building  construction  groups  with  integrated  civil  engineering  and  construction support  service  capabilities.  It  is  principally  involved  in  the  construction  of  residential,  industrial  and  commercial  projec ts,  and  civil engineering projects as a main contractor. As an A1 grade contractor in general b uilding, it is able to tender for public sector building projects of unlimited contract value, while its A2 grade in civil engineering allows it to handle engineering projects of up to SGD85m. It has established a reputation for its ability to handle large-scale and complex projects.
Recommendation Chart

Source: OSK

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