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KSH Holdings - OCBC Investment 2015-11-11: 2QFY16 results boosted by Beijing TOP

KSH Holdings - OCBC Investment 2015-11-11:  2QFY16 results boosted by Beijing TOP KSH HOLDINGS LIMITED ER0.SI 

KSH Holdings: 2QFY16 results boosted by Beijing TOP 

 S$15.8m boost from Chinese TOP 
 Strong balance sheet in net cash 
 250.4% total return since Sep12 upgrade 


2QFY16 PATMI up 244% YoY to S$23.2m 

  • KSH reported that its 2QFY16 PATMI increased 244% YoY to S$23.2m mostly due to the completion of a property development project (Liang Jing Ming Ju Phase 4 – Sequoia Mansion) in Beijing China, which contributed S$15.8m to the bottom line, and a stronger share of results of associates which rose 311% to S$22.2m due to higher progress recognition from development projects. 
  • In terms of the topline, 2QFY16 revenues were fairly stable at S$62.1m (down 0.9% YoY) due to slightly lower project revenues from its construction segment. 
  • We judge this set of results to be mostly in line with expectations and 1HFY16 PATMI now make up 57% of our full year forecast. 
  • The group proposes to issue one bonus share for every eight existing shares, and also a total dividend of 1.55 S-cents per share for 1HFY16 (0.30 S-cents special and 1.25 Scents interim). 

Enjoys a strong balance sheet in net cash position 

  • KSH successfully tendered for S$146.2m of construction projects year to date and the order book is fairly healthy at S$324m as at end Sep- 15. 
  • In addition, the group continues to enjoy a robust balance sheet with S$144m in cash and equivalents and is in a net cash position. 
  • We understand that management continues to be on a disciplined lookout for acquisition opportunities within its core business segments. Since we upgraded KSH to a buy rating on 19 Sep 2012, the share price has been on an absolute tear – and shareholders have enjoyed a total return of 194.9% (versus the STI‟s 3.5% over the same period). 
  • While we continue to believe in management's execution ability, we see a diminished scope for earnings growth in FY17 due to the absence of major TOPs next year and an uncertain outlook for the domestic residential market. 
  • Our fair value estimate dips to S$0.67 from S$0.71 due to softer residential price assumptions and we downgrade the stock to HOLD on valuation grounds.


Eli Lee OCBC Securities | http://www.ocbcresearch.com/ 2015-11-11
OCBC Securities SGX Stock Analyst Report HOLD Downgrade BUY 0.67 Down 0.71


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