Lian Beng

Lian Beng: 1QFY15 results were in line with estimates, with net profit jumping 58.5% to $12.0m on revenue of $167.6m (+10.8%). The increase in revenue was led by higher revenue generated from the construction segment and workers' dormitory business, offset partially by decrease in sales from the ready-mixed concrete segment. Gross margin decreased to 9.9% from 12.6%, mainly due to several new projects that are presently recognised at the beginning stages of construction. Bottom-line was further buoyed by increased contributions from associates and JVs at $5.1m versus a loss of $3.6m from the previous year, mainly due to development projects from Newest, KAP Residences and The Midtown. Going forward, Lian Beng is cautiously optimistic of the construction market outlook in the next 12-months and will continue to leverage its established track record and capability to tender for more public and private sector projects. The group’s construction orderbook of ~$1.0b will provide revenue visibility over the next four years. Separately, we guide that Lian Beng’s recent diversification into the Leng Kee motor belt and Australia’s residential and hotel segment also suggests that management is proactive in seeking new market opportunities to offset the sluggish domestic residential property segment. Recurring income base is expected to gain sizeable mass, with the addition of asphalt-premix, higher contributions from its workers dormitory in Mandai and concessions to a new granite quarry. At the current price, Lian Beng trades at just 5.7x forward P/E.