Thursday, August 19, 2010

CSC Hldgs

CSC Hldgs unit has been served a writ of summons and faces a $10.3m claim from main con Penta-Ocean Construction relating to certain piling works for Exxon-Mobil's S'pore Parallel Train Project at Jurong Island. The piling portion of the project started in 2008 and was completed late 2009. Penta-Ocean's claim includes recovery of monies paid to CSC under an earlier adjudication determination.

It is premature to predict the outcome of this case but if it is ruled in favour of Pan-Ocean, it will have a material impact on CSC’s earnings. For 1QFY11, CSC reported a 45% drop in net profit to $3.3m on a 4.5% dip in revenue. Intense competition has placed contracts prices under downward pressure and resulted in many projects being carried out at lower profit margins. As a result, gross margin declined to 12.0% vs 18.6% a yr ago but higher than s an improvement from 10.6% in 4QFY10.

CSC has recently secured orders worth $50m & it is also undertaking several projects for MRT’s Bt Timah stations. Current orderbook stands at $180m but group is unlikely to match FY10’s $24.8m earnings this FY.

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