KEONG HONG - UOB Kay Hian 2015-12-02: A Fruitful Year And Yet Another In FY16

KEONG HONG - UOB Kay Hian 2015-12-02: A Fruitful Year And Yet Another In FY16 KEONG HONG HOLDINGS LIMITED 5TT.SI 

KEONG HONG (KHHL SP) - A Fruitful Year And Yet Another In FY16 

VALUATION

  • Maintain BUY with a slightly lower SOTP target price of S$0.635 as we factor in the S$0.04/share dividend that has been declared in FY15. 


RESULTS 

  • 4QFY15 net profit surged 411% to S$22.5m mainly due to the recognition of property development profit from its sold out 20% owned executive condominium project, Twin Waterfalls. 
  • Strong cash flow generation boost net cash position. Keong Hong generated free cash flow of S$37.5m during FY15 as net cash swelled to S$33.6m (S$0.149/share) as at 30 Sep 15. 


INVESTMENT HIGHLIGHTS 


 9% dividend yield. 

  • As a result of the bumper profit, Keong Hong has declared a final dividend of S$0.04/share. 
  • Inclusive of the interim dividend of S$0.005/share (declared and paid earlier), it translates to an attractive dividend yield of 9%. 

 Another bumper dividend in FY16? 

  • For FY16, investors can look to another year of sustained profit with the expected TOP of Skypark Residences (92% sold) which we estimate Keong Hong to recognize property development profit of S$14.9m (S$0.064/share). 
  • Keong Hong paid out 27% of its earnings in FY15. Given management’s generous track record of rewarding shareholders, we believe shareholders may be in for another bumper dividend when Skypark Residences achieved TOP in FY16. 

 Solid balance sheet and in a stronger net cash position. 

  • As at 30 Sep 15, Keong Hong was in a net cash position ofS$33.6m. We expect Keong Hong to receive about S$17m in cash from the Twin waterfalls project when its associate pays out dividends back to the group. 
  • In FY16, the TOP of Skypark may see another S$30m of cash proceeds being returned to the group. After taking into account the S$0.04/share dividend pay out and incoming cash proceeds, Keong Hong’s net cash position may expand to S$71.3m (S$0.306/share). 

 Robust order book. 

  • As at 30 Sep 15, Keong Hong had a construction orderbook of S$462m, providing earnings visibility till FY18. Of noteworthy, Keong Hong secured a S$107.5m contract in Aug 15 for the construction of a 20-storey medical building at Victoria Street, which is expected to be fully completed by Aug 17. 
  • Given the short time frame of the project, we expect bulk of the profit from this project to be recognized in FY16 and FY17.


Loke Chunying UOB Kay Hian | http://research.uobkayhian.com/ 2015-12-02
UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 0.635 Down 0.665


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