Mun Siong

Mun Siong: Mun Siong swung back to a net profit of $0.5m for 3Q14 versus a net loss of $0.03m from the previous year, taking 9M14 net profit to $2.2m (+436.1%). Revenue fell 9.6% to $17.3m, partly due to the limited resources (especially human resource due to limitation on the use of foreign workers), which resulted in the group undertaking works and projects that met management’s pre-determined criterion. Gross margin however expanded to 11.5% versus 7.7% from the previous year, due to the recognition of project completion and the group’s widening of products and services. Going forward, the group guides that the recent steep decline in oil prices, imminent interest rates hikes in North America and uncertainty in the health of China’s economy may have negative impact on the group’s profitability, highlighting that demand for end products is reliant on the state of major global economies. In the event of a slowdown or volatility in these economies, the upgrading of existing facilities or construction of new facilities would be deferred or cancelled. Apart from the on-going maintenance contracts, Mun Siong currently has an order book of $16.4m which stretches revenue visibility over the next half a year. At the current price, Mun Siong trades at 10.1x annualized 9M14 P/E, while balance sheet remains strong with a net cash position at $15.5m.