Starburst Holdings - DBS Research 2015-11-13: Niche defence play

Starburst Holdings - DBS Research 2015-11-13: Niche defence play 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 BUY Maintain BUY 0.37 Down 0.54

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