Wednesday, October 16, 2013

Lian Beng: 1QFY14 results marred by marketing expenses (OCBC)

Lian Beng:
Fair value S$0.58
add: 12m dividend forecast S$0.02
versus: Current price S$0.54

1QFY14 results marred by marketing expenses
• 1QFY14 PATMI down 31% YoY
• Gross margins dip due to revenue mix
• Increasing uncertainties in resi segment

Lian Beng announced 1QFY14 PATMI of S$7.3m – down 30.9% YoY – mostly due to increased selling and marketing expenses incurred at development projects and the cessation of tenant leases at Hougang Plaza. Topline for 1QFY14 came in 44.2% higher YoY at S$163.5m;
due to a shift in revenue mix with a heavier percentage contribution from the construction segment, overall gross margins continue to dip – falling from 14.1% in 1QFY13 to 12.2% in 1QFY14. We note that Lian Beng continues to enjoy a firm construction book of S$1.2b, which would buttress forward revenues to an extent, and also a strong balance sheet with S$200.7m in cash with a fairly benign net gearing of 25.2%. That said, we see increasing uncertainties in the domestic residential space from recent cooling measures which could result in headwinds for the group’s property development business going forward. Rated BUY with a fair value estimate of S$0.58. (Eli Lee)

1QFY14 profit down 31% YoY
Lian Beng announced 1QFY14 (ended 31 Aug 2013) PATMI of S$7.3m – down 30.9% YoY – mostly due to increased selling and marketing expenses incurred at launched projects (Spottiswoode Suites, The Midtown, Newest, KAP Residences and Eco-tech@Sunview) and the cessation of tenant leases at Hougang Plaza which was demolished for redevelopment. We also note the relatively new dormitory business contributed an estimated S$1.3m - S$1.4m in attributable net profit over the quarter.

Falling gross margins from shifting revenue mix
Topline for 1QFY14 came in 44.2% higher YoY at S$163.5m due to higher contributions from the construction and property development businesses as well as the ready-mixed concrete division. Due to a shift in revenue mix with a heavier percentage contribution from the construction segment, however, overall gross margins continue to dip – falling from 14.1% in 1QFY13 to 12.2% in 1QFY14.

Expect profit recognition from M-space in 2Q-3QFY14
Looking forward to 2Q-3QFY14, we expect profit contributions from the fully sold 55%-owned industrial development, M-space, which can only be recognized upon TOP as stipulated by the accounting standard INT FRS 115. We note that already launched development projects from the group are achieving fairly firm sell-through rates and that the construction order book remains strong at S$1.2b as at end Aug 2013 – only marginally down from S$1.3b as at end May 2013.

BUY with a FV estimate of S$0.58
Besides the firm construction book, which would buttress forward revenues to an extent, Lian Beng also possesses a strong balance sheet with S$200.7m in cash with a fairly benign net gearing of 25.2%. That said, we see increasing uncertainties in the domestic residential space from recent cooling measures which could result in headwinds for the group’s property development business going forward. BUY with a fair value estimate of S$0.58.


Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 11/10/13

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