Chip Eng Seng

Chip Eng Seng: Chip Eng Seng (CES) has secured a $232.8m contract from HDB for construction works at Woodlands. The project will take ~42 months to build, and is expected to be completed by mid-2018. Despite the slowdown in the number of building contracts by HDB and the intense competition in public tenders, the latest contract win cements CES' position as one of the leading contractors with the largest number of HDB contracts on hand. As at 30 Jun ‘14, CES’ order book stood at $548.0m, underpinning revenue visibility over the next four years. Earnings are expected to be back-end loaded in 2H14, underpinned by the completion of development projects, Belvia (3Q14) and Alexandra Central (4Q14), as well as progressive revenue recognition from the ongoing mixed development projects, Junction Nine (commercial) and Nine Residences (residential). In addition, recurring income is also taking shape, with the upgrading works at the group’s CES Centre office building slated for completion by year end, while its first hotel property along Alexandra Road is expected to be completed sometime in 2015. Over the past six months, the group has bought back a total of 12.5m shares representing 1.94% of shares outstanding, under its share buyback scheme. The last transaction was on 2 Sep, with the purchase of 1.5m shares at an average price of $0.899, highlighting management’s confidence in its outlook. The group currently trades at just 3.2x forward P/E. Overall, the street has 2 Buy ratings on the counter with a consensus TP of $1.03.