KSH Holdings - OCBC Investment 2017-05-30: FY17 Results Broadly Within Expectations

KSH HOLDINGS LIMITED ER0.SI

KSH Holdings - FY17 Results Broadly Within Expectations

KSH’s FY17 PATMI (ending Mar 2017) decreased 33.4% to S$41.0m mostly due to weaker contributions from its construction segment and lower share of results from associates (which fell 82.5% YoY to S$8.49m).
We understand that, in addition to weaker profit recognition from development projects, the group’s share of results from associates also suffered from S$3.9m of preliminary costs incurred on the Gaobeidian project and a S$3.6m provision for impairments on unsold projects.
In terms of the topline, FY17 revenues similarly decreased 18.8% YoY to S$199.3m primarily due to lower construction contributions.
Overall, excluding one-time items, we judge these results to be broadly within expectations. The group proposed a final and special cash dividend of 1.5 S-cents and 0.5 S-cents, respectively, which brought total dividends in the financial year to 3.25 Scents.
In addition, management has also proposed to issue one bonus share for every four existing shares.

As at end Mar 2017, KSH’s construction order book stands at a healthy S$340m after winning a S$145.7m contract from NUS for a 16-floor research building.
Looking ahead to FY18, KSH has soft launched its freehold housing project, 121 Collection on Whitley, and is looking to launch its Geylang project. The group has also taken a 35% stake in the en-bloc acquisition of Rio Casa in Hougang for redevelopment. In addition, management reports that 97.5% of Prudential Tower has been sold as at end Apr 2017, for which KSH’s share of profits is expected to be recognized over the next financial year.
In China, we understand that the group is waiting for approvals to launch Phase 1 of its Gaobeidian project (5,540 units) which will be released for sale progressively.
After updating our valuation model for the latest assumptions and new projects, our fair value estimate increases to S$0.86 from S$0.61 previously.
That said, given the strong run up in the group’s share price over the year to date, our rating is downgraded to HOLD on valuation grounds.

Eli Lee OCBC Investment | http://www.ocbcresearch.com/ 2017-05-30

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