Thursday, January 14, 2016

Lian Beng

Lian Beng (S$0.49): 2QFY16 results weighed by shrinking construction/concrete businesses

Lian Beng’s 2QFY16 net profit dipped 2.8% y/y to $22.9m as revenue extended its quarterly decline to $130m (-35%).

Similar to the first fiscal quarter, top line was weighed by deterioration in the construction and ready-mixed concrete businesses. Gross margin improved by 3.2ppt to 11.7% due to larger property mix.

Offsetting higher finance (+64.5%) and admin (+7.1%) expenses, contributions from associates and JVs rose 11% to $18.2m from various property development projects, including NEWest (10% stake), KAP Residences (15%), The Midtown and Midtown Residences (50%).

While net gearing crept up to 0.32x from 0.29x in 1QFY16, cash hoard remained strong at $198.7m and an interim DPS of 1¢ was maintained.

The group’s construction order book shrank to $350m from $452m in Aug 15, with visibility stretching through FY17.

Meantime, it has acquired a property at St Kilda, Melbourne to redevelop into residential project. Its dormitory development at Jalan Papan, is expected to commence operation in mid 2016 and contribute to the associates line.

On its outlook, management expects the construction industry to remain challenging, hurt by high labour cost.

Lian Beng is currently trading at deeply discounted 0.49x P/B and offers an indicative yield of 2.06%.

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