TTJ

TTJ : FYJul14 net profit soared 47% to $21.8m, thanks to a decline in cost of sales (-2%), even as revenue rose 6% to $134.7m. Revenue growth was driven by both the structural steel business and dormitory business. The structural steel business grew 3% to $115.3m, mainly due to a substantial completion of contract works for a number of major industrial projects including the Lanxess Compass Project, Nalco Eastern Hemisphere Core Plant and the Methionine Plant on Jurong Island, as well as LNG Train 9 project for Petronas in Sarawak, M’sia. On-going key projects such as the Tuas West MRT Extension Depot, the National Art Gallery and Tanjong Pagar Centre, which is set to become Singapore’s tallest building at 290 metres, also provided a boost to the group’s topline. Revenue from the Jalan Papan dormitory (5,300 beds) jumped 19.5% to $18m, attributable to higher rental rates. Gross margin expanded 5.5ppt to 27.5%, mainly due to a greater contribution from the higher margin dormitory business. Order book stood at $97m, to be substantially fulfilled between FY15 and FY16. New projects secured include: Tanjong Pagar Centre, DUO condo at Rochor Road, MediaCorp’s new HQ at Mediapolis @ one-north, the new State Courts complex at Havelock Square, and Yishun Community Hospital. Alongside the first set of results, TTJ proposed a first and final dividend of 1.4¢, up from 0.9¢ a year ago. Going forward, the group is cautious about keener competition from an influx of overseas players entering the market in recent years, and a slower pace of rollout of industry projects due to labor supply constraints in Singapore. Meanwhile, the Ministry of Industry has projected the construction sector to grow at a slower pace for 2H14, pegged to a decline in private commercial and industrial building works. Management expects FY15 to be a challenging year, but remains confident about its long term prospects given its strong track record in structural steel in Singapore. The group has been channeling its fabrication works to its Keluli factory in M’sia, where labor costs are lower, and will strive to raise productivity through training of workers and automation. TTJ trades at 5.6x P/E, 1.1x P/B and offers 3.8% yield.