STARBURST HOLDINGS LIMITED
40D.SI
Starburst Holdings - Niche defence play
Integrated defence play.
- Starburst is one of the few integrated defence plays globally.
- Since its inception in 1999, it has been building a reputable track record in the fitting out of firearm-training facilities and tactical training mock-ups. It is a beneficiary of the higher defence spending in Southeast Asia and the Middle East.
- Maintain BUY, TP reduced to S$0.37, as we push back the recognition of contract wins.
New factory to double production capacity.
- Starburst’s new factory will enable the Group to increase its fabrication efficiency and capacity, and to undertake a higher number as well as larger projects simultaneously.
FY15 affected by delay in contract wins and handover of projects.
- We now expect Starburst to record a net l projects. oss in FY15, mainly due to delays in contract wins and handover of projects.
- We expect Starburst to gradually improve in FY16F, with the progressive booking of revenue from contracts clinched in FY15.
- So far, Starburst has clinched S$37.5m worth of contracts and letters of intent for projects and maintenance work.
- FY17F should be a better year, with the expected award of a few big contracts in the range of S$20m to S$60m each.
Valuation:
- Our target price of S$0.37 is based on 11x FY16F PE, which is pegged to 30% discount to peers’ average of 15x forward PE.
- We believe players in this industry will remain niche as the growth potential is not particularly attractive for new players in this already mature industry.
- Furthermore, pre-requisites such as specialised technical skills and established track record may deter new entrants.
Key Risks to Our View:
Mainly dependent on project-based non recurring contracts.
- Starburst’s business is largely made up of non-recurring contracts, which is dependent on its ability to secure new contracts.
LING Lee Keng
DBS Vickers
|
http://www.dbsvickers.com/
2015-11-13
DBS Vickers
SGX Stock
Analyst Report
0.37
Down
0.54
