Lian Beng

Lian Beng: 2QFY15 net profit rose 241.3 y/y to $23.5m, bringing 1HFY15 net profit to $35.5m (+105.2% y/y), mainly from contributions from JVs and associates. Meanwhile, 1HFY15 revenue rose 26.1% to $367.6m due to increased revenue generated from the construction segment and workers' dormitory business, partially offset by decreases in the ready-mixed concrete segment. Gross margins fell 2.4ppt. Contributions from JVs and associates were from the disposal of 122 Middle Investment (19%-owned hotel JV), and contributions from other JVs and associates, i.e. NEWest, KAP Residences and The Midtown. Though management expects a challenging construction industry ahead, it highlights a $0.8b construction backlog, providing visibility through FY17. Meanwhile, 50% JVs like Midtown (96% sold) and Spottiswoode Suites (78% sold) will contribute profit in FY15, while 65% JV at Mandai Link (93% sold) will contribute towards FY19 earnings. Lian Beng will also be co-developing a workers' dormitory and training centre for The Association of Process Industry at Jalan Papan, which will contribute to recurring income once completed. Interim DPS of 1¢ announced. Lian Beng is currently trading at 4.5x annualized 1HFY15 P/E and 0.8x P/B. Latest broker rating: OCBC maintains Hold with TP of $0.65