Yongnam

Yongnam: Reported 1Q11 results which were above expectations. Grp reported a record qtr net profit of $15.0m, +15% YoY and + 5% QoQ, even as rev declined by 10% YoY to $75m. Strong performance was driven by significantly improved gross margins of 33.2% in 1Q11, compared to an average of 28.6% achieved in FY10, partly due to the higher proportion of earnings from the higher-margin Specialised Civil Engineering (SCE) business……

Grp’s contract win momentum also appears intact, recently announcing a landmark contract win worth $75m for providing structural steel works for the SG Sports Hub, and follows 2 earlier contract wins for MRT North-South line extension and NUH medical center, bringing new order for FY11 to approximately $150m, including unannounced contracts, bring current orderbook to over $450m underpinning earnings visibility till 2012….

We note that at current price, valuations appear compelling, with grp trading at 5.6x FY11E P/E. DBSV maintains Buy with $0.38 TP. Tip more contract wins, especially from the Downtown Line 3 projects in the next 6-12 mths, to provide further catalysts to share price.