BBR Holdings

BBR Holdings: handily beats expectations. Profit for 2Q14 surged 82.7% y/y to $5.3m, in line with 83.7% y/y increase in revenue to $191.6m. EPS for 2Q14 is 1.67 cents, bringing EPS for 1H14 to 3.31 cents. Revenue climbed on outstanding performance in construction and property development segments, partially offset by lower revenue in specialised engineering segment. Gross margin decreased 1.1ppt to 5.5% from lesser contribution of higher-margin specialized engineering segment, gross profit increased 55.0% y/y to $10.6m. There is earnings visibility from BBR’s strong order book of $850m, mainly concentrated in Singapore and Malaysia. Moving on, BBR has 14.0% gross gearing and 6.2% net gearing, sound for an engineering and construction services company. Trade receivables is the largest change on balance sheet. Total current and non-current TR rose 38.5% from Dec 2013 to $133.4m in Jun 2014 due to significant increase in value of work progressively completed but are still in active construction. The challenging industry outlook, however, may weigh on BBR’s future performance. Admittedly, competition may increase going forward with expected slowdown in overall demand in private sector construction. Labour costs will rise with higher foreign levies and shortage of foreign workers. The management is confident of remaining profitable for FY2014. BBR trades at 4.3x annualized 1H14 P/E and 0.66x P/BV with NAVPS at 43.47 cents.