Lian Beng

Lian Beng: 1QFY16 earnings surges on property sales

The property developer reported stellar 1QFY16 net profit of $32.3m (+170%), boosted by developments projects spearheaded by associates and JVs.

Topline performance was weaker however, with revenue declining 19.1% to $135.6m mainly due to weaker construction and ready-mixed concrete segments.

Consequently, gross profit fell by 8.5% to $15.2m despite gross margin widening 1.3 ppt to 11.2%.

Overall, the starkly improved bottom line was due to profit recognition at its property development projects which attained the following sales status:
1) NEWest (10% stake)- 91% sold
2) KAP Residences (15% stake) - 99% sold
3) The Midtown and Midtown Residences (50% stake) - 97% sold

In addition to the above projects, Lian Beng’s bottom line was further buttressed by a one-time profit recognition from its 19% stake in industrial development project, Ecotech@Sunview, which obtained its TOP.

Operating cash flow reversed into the red with a net outflow of $16.7m mainly due to weaker performance from its core operating business (sans contributions from associates and JVs).

Despite this, Lian Beng boasts a cash hoard of $220.2m. Coupled with a comfortable net gearing of 0.29x, it would have sufficient headroom to explore opportunities to further expand its business.

Moving forward, the group’s $452m construction pipeline should provide some earnings visibility through FY17.

Lian Beng is currently trading at a massive 44.5% discount to its NAV. The street has 3 Buy and 1 Hold ratings on the counter with a consensus TP of $0.65.