Yongnam

Yongnam: FY13 net profit slumped 87.3% to $5.5m while topline rose 19.9% to $361.6m, on increased contributions from Structural Steelwork projects (+62.8% to $214.5m) from ongoing projects like Singapore Sports Hub, National Art Gallery, etc. This was offset by Specialist Civil Engineering (-13.4% to $147m). Gross margins fell 14.6 ppt to a dismal 10.5% on poor revenue mix plus cost overruns of the existing Structural Street projects. G&A expenses also ballooned to $31m (+28.3%) on a loss on disposal of assets of $8.1m and a $5.1m provision on amounts owning for Alpine Bau, the insolvent main contractor of Downtown 2 line. In addition to the invitation to resubmit proposal for the Hanthawaddy Airport, Yongnam had in Nov’13 won $168m steelwork project for Marina One, which will contribute financially 1Q16. Management is pursuing $1.2b worth of new infrastructural and commercial projects in Singapore, Hong Kong, Macau and Middle East, of which, if awarded, is expected to commence from mid-2014. In addition, management guides 1H14 would be challenging as performance is contingent upon the wins of these orders. Orderbook stood at $340m at end Dec. Yongnam trades at a hefty 53.5x trailing P/E, while P/B stood at 0.9x. First and final DPS of 0.6¢ proposed (FY2012: 1¢) CIMB still touts that here’s no reason to own Yongnam, and maintains Reduce with TP $0.18