LIAN BENG - UOB Kay Hian 2015-10-19: 1QFY16 Net Profit Surges 169% yoy

LIAN BENG - UOB Kay Hian 2015-10-19: 1QFY16 Net Profit Surges 169% yoy LIAN BENG GROUP LTD L03.SI 

LIAN BENG (LBG SP) - 1QFY16 Net Profit Surges 169% yoy 

VALUATION 

  • Maintain BUY with a higher SOTP target price of S$0.81 due to higher NAV as at 31 Aug 15. 

RESULTS 

  • 1QFY16 net profit surged 169% yoy to S$32.3m (36% of our FY16 forecast) due mainly to the recognition of property development profits. Gross profit, however, fell due to lower sales from the construction and ready-mixed concrete segments. 


OUR VIEW 


• Asphalt plant up and running. 

  • Lian Beng’s 40%-owned asphalt plant has been operational since Mar 15. We estimate the plant can generate an annual net profit of S$0.3m-0.4m to Lian Beng. 

• Depleting construction order-book. 

  • As at 31 Aug 15, Lian Beng had an order-book of S$452m, which will provide earnings visibility through to FY17. In the absence of any order wins, we see downside risks to our earnings forecasts. However, Lian Beng has executed its diversification well over the years with rental income from investment properties, property development profits and profit from the sales of asphalt and ready-mixed concrete expected to support profitability. 

• Another three levels of Prudential Tower sold. 

  • We understand another three storeys of Prudential Tower have been sold. We estimate Lian Beng to recognise S$3m in profit when the sale is completed in Nov 15. Upon completion of the sale, about 45% of Prudential Tower would have been sold. 

• S$100.6m in investment securities. 

  • About 90% are invested in bonds (maturity of less than three years) and 10% are in shares (eg a 5% stake in Centurion) 

• Following the cash trail. 

  • We note there is a S$128m net amount due from joint venture and associate related to Lian Beng’s property development projects in its current assets. Assuming no further investments, we understand this amount will be transferred to Lian Beng’s cash holdings within the next 12 months upon completion of the property development projects. 

• Current market cap is nearly 100% asset backed. 

  • Taking into account Lian Beng’s cash, investment securities and investment properties (freehold Mandai dormitory and freehold office building at Playfield Road) and deducting off bank loans and non-controlling interests, Lian Beng is worth S$244m (S$0.48/share), excluding the net S$128m (S$0.25/share) due from joint ventures and associates in its current assets, which will help further boost its cash holding. 

• Price support from active share buybacks. 

  • Lian Beng repurchased about 3.8m shares from the market in the last three months at S$0.49-0.565/share.


Loke Chunying UOB Kay Hian | http://www.rhbgroub.com/ 2015-10-19
UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 0.81 UP 0.79


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