Lum Chang Holdings
LCH FY13 (Jun.) net profit of SGD21.5 mln (+2.3% YoY) took into account net fair value gains on investment properties of SGD5.8 mln, which stripped out, sees SGD15.6 mln in adjusted net profit. The latter came in above our expectations with better-than-expected gross margin of 10.9% (FY13E:9.5%) and lower taxation. These were partially offset by higher administration expenses and marketing expenses. A final net DPS of 1.25 cent was declared, bringing the total net DPS for FY13 to 2 cents (FY12:2 cents)
FY13 group revenue rose significantly at 75% YoY to SGD494.6 mln, driven by: (i) higher construction revenue (+69% YoY) with the commencement of Science Park Drive and Nucleos at Biopolis Road projects; and (ii) property revenue (+140% YoY) with more phases completed and recognized for its Malaysian development properties. This was partially offset by: (i) weaker FY13 gross margin at 10.9% (- 2.1%-pts YoY) due to rising construction costs; (ii) higher distribution and marketing cost (+87% YoY); and (iii) administration cost (+31% YoY) attributable to higher staff expenses and acquisition costs incurred from the recent purchase of its London property. Excluding all net fair value gains and gain on disposal in FY12 and FY13, the group’s adjusted net profit would have increased about 16% YoY. LCH’s order book stands at SGD474 mln. The construction sector outlook remains sanguine as the Government continues to accelerate infrastructure spending to keep in line with population expansion.
Earnings Outlook / Estimates Revision
We have increased our FY14 net profit forecast slightly by 1% after mainly incorporating higher gross margin and lower taxation partially offset by higher administration cost. We expect FY14 earnings to be bolstered by the completion of its fully-sold 20%-owned Executive Condominium (EC) Esparina Residences which is expected to achieve TOP at end-2013. Meanwhile, we introduce our FY15 forecast with net profit relatively unchanged at SGD19.2 mln. At current share price, the stock offers a decent dividend yield of about 5.8%.
LCH’s second JV EC project, Twin Fountains at Woodlands has todate sold about 78% of its total 418 units. The project is jointly developed with Frasers Centrepoint, where LCH holds a 30% stake. The sales of Twin Fountains are expected to boost the group’s earnings in FY16/FY17 when the EC project is due for completion in 2016. Prospects for the construction sector remain sanguine as the Government continues to accelerate infrastructure spending to keep in line with population expansion.
A sharp rise in labor or material costs, shortage of skilled labor or increase in project execution costs can adversely affect project viability and profitability. Similarly, a deteriorating economic outlook will likely reduce construction demand (particularly for private projects) and may affect the group’s property sales.
Source/Extract/Excerpts/来源/转贴/摘录: S&P Capital IQ Equity Research