Tuesday, November 29, 2016

Keong Hong

Keong Hong's 4QFY16 net profit slumped 24.4% to $17m, in tandem with its 24.8% decline in revenue to $57.1m. This brought FY16 earnings and revenue to $34.7m (-9%) and $248m (-12%) respectively.

For the year, the revenue drop was attributed to lower recognition of construction sales as two projects, Alexandra Central Phase 2 and SkyPark Residences, were largely completed in FY15. In addition, two new projects, Raffles Hospital Extension and Parc Life, were at its initial sales recognition stage.

Gross margin expanded to 15.6% (+5ppt), due to higher profitability for certain construction projects, and was further shored by retention sum received from completed projects.

Bottom line was however dragged by lower JV/associate contribution of $14m (-27.1%) following the TOP of residential development project, Twin Waterfalls Executive Condominium, in FY15.

Accordingly, management lowered the final DPS to 3¢ (4QFY15: 4¢), bringing full year payout to 3.5¢ (FY15: 4.5¢).

Keong Hong's construction order book contracted to $351m (3QFY16: $411.5m), providing revenue visibility through to FY18.

Management opines that 2017 will be a difficult year for the local construction sector, particularly in private residential construction. As such, it intends to focus on the commercial, industrial and institutional sector.

At the current price, Keong Hong trades at 6.6x trailing P/E and 0.81x P/B, and offers a 7.3% dividend yield.

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