Chip Eng Seng

Chip Eng Seng: Announced a moderate set of 3Q11 results. Rev at $72.3m was -37.2% yoy and -15.9% qoq, while net profit at $24.8m, -75.1% yoy and +40.1% qoq. (Stock does not have any estimates forecast)

Lower rev was due to the absence of construction contribution rev from The Parc Condominium, CityVista Residences, Grange Infinite and Sengkang N4C3, as these projects had been completed, and grp’s ppty development also saw lower contribution from a development project, Oasis@Elias which obtained TOP on 26 Sept11.
Main contributions for grp’s construction division was from the near completion of on-going projects such as Queenstown RC25 and Punggol West C25 and new construction projects such as Hougang N9C12, Privé and Belysa.

Gross margins however surged to 60.9% vs 8% yoy and 32.6% qoq mainly attributed to grp’s ppty development division, where a number of construction projects obtained TOP or were substantially completed in the current qtr, while cost savings as a result of value-added engineering and better project mgt were recognised in qtr.

Overall yoy plunge in grp’s net profit was largely attributed to the the adoption of INT FRS 115, which had resulted in the restatement associates for 3Q10 to $98.4m vs the previously reported figure of $22.4m, while current qtr associates contribute a loss of 0.76m, due to marketing and selling expenses incurred and the absence of share of profits from development projects.

We note that at current price, grp trades at an annualized 1.9xFY11E P/E, although we caution of the rise in grp’s net gearing which rose to 0.73 vs 0.47 yoy due to bank borrowings taken to finance the purchase of land for property development in Singapore and Australia.