TTJ

TTJ: announcing their FYJul14 results after market closes today (25 Sep). Based on 9MFY14 results so far, Phillip thinks that the FY14 results could be positive, leading to a possible price upside ex-post results announcement. TTJ has two core business segments of Structural Steel and Dormitory. The Structural Steel business fabricates steel structures used in construction of buildings, factories, plants and infrastructure. The Dormitory business operates a 5,300-bed dormitory in Singapore. The Structural Steel (87.8%) business segment was the significant contributor to revenue compared to Dormitory (11.8%) in FY13, with 0.4% from Other business. TTJ improved its gross margin y-y from 21% (9MFY13) to 25% (9MFY14), and net margin improved y-y from 10% (9MFY13) to 15% (9MFY14); indicating that TTJ had managed to control costs and improvements to gross margin flowed down to bottom line during 9MFY14. For the period of 9MFY14, there had been both q-q and y-y EPS growth for each of the three quarters. Over the last three quarters, price of TTJ also reacted positively the following day after their earnings announcement: • 1QFY14 announced 12 Dec 2013; next day closing price +1.7%. • 2QFY14 announced 12 Mar 2014; next day closing price +3.3%. • 3QFY14 announced 12 Jun 2014; next day closing price +7.1%. Annualising 9MFY14 EPS implies a forward P/E of 5.9x. With the visible pipeline of infrastructure projects in Singapore (e.g. new MRT lines till 2030), Phillip believes TTJ as a supplier of essential construction material could arguably deserve a higher P/E rating due to the recurring nature of earnings. The house does not have a rating on the company.