TTJ Holdings - An Undervalued Business
- TTJ Holdings’ (TTJ SP, Not rated) 2QFY17 net profit fell 43% YoY to SGD3.1m, as revenue declined in both, structural steel and dormitory businesses.
- During the quarter, the lease tenure for the 5,300-bed dormitory at Terusan Lodge 1 expired, ending a lucrative source of income cash flow for the group. TTJ was successful in clinching several new projects for its structural steel business, including the one that involves the supply and installation of structural steel works for Funan DigitaLife Mall.
- The group's orderbook now sits at SGD59m compared to SGD48m six months ago. To date, the group continues to experience a healthy level of enquiries for both public and private sector projects.
- TTJ stands out for its highly cash-generative business, with SGD56m of free cash flows generated in the past two years. The group continues to operate with a rock-solid balance sheet and net cash of SGD82m (SGD0.23/share).
- TTJ paid a bumper dividend of 8 cents/share amounting to SGD28m in FY15.
- Backing out its net cash of SGD82m, TTJ's market cap of SGD54m would be supported by average earnings of SGD8-10m per annum from the structural steel business alone. This would imply 5.4-6.8x trailing P/E, which we believe is cheap given the healthy orderbook and expectations of new order inflow in current and next fiscal year.
- TTJ’s share price is up 11.4% YTD.