Lian Beng Group: Expecting a Strong FY14
(BUY, SGD0.57, TP: SGD0.70)
LBG recorded 4QFY13 PATMI of SGD9.3m (-19.3% y-o-y), on the back of a 39.1% revenue growth. It expects to book profits from the sale of its industrial development – M Space – in FY14, which should boost its earnings growth. LBG’s orderbook of SGD1.3bn would keep it busy till FY16. The Group’s outlook remains positive, as LBG is set to secure more contracts on robust construction demand. Maintain BUY. Margin squeeze. LBG achieved a lower gross margin of 10.4% in 4QFY13, vs 17.6% in 4QFY12, due to higher raw material costs and lower revenue in the higher-margin property development segment. This pushed PATMI lower. LBG declared a dividend of SGD0.01 per share and a special dividend of SGD0.0025 per share.
Earnings to climb as M Space obtains TOP. LBG’s 55%-owned industrial development M Space, which has been fully sold, is expected to obtain its temporary occupation permit (TOP) in FY14. Once the TOP is obtained, LBG would be able to recognise the sales revenue, which would boost the Group’s FY14 earnings.
Healthy orderbook backed by positive outlook. LBG’s current orderbook of SGD1.3bn is expected to last till FY16. Within the first half of this year, LBG had secured nine contracts totalling SGD950m. The speed at which the Group secured contracts is a testament to its strong capabilities. We see positive outlook for the construction sector, with rising construction activities in both the private and public sectors. This should lend support to LBG’s orderbook growth.
Maintain BUY, with SGD0.70 TP. LBG currently trades at 4.9x FY14 earnings. Our SGD0.70 TP is based on 6x FY14 earnings. We like LBG for its strong orderbook, which will continue to be supported by the heightening construction activities in both the private and public sectors.
Publish date: 31/07/13