Starburst Holdings - OCBC Investment 2016-08-16: 1H16 losses widened on higher project costs

Starburst Holdings - OCBC Investment 2016-08-16: 1H16 losses widened on higher project costs STARBURST HOLDINGS LIMITED 40D.SI 

Starburst Holdings: 1H16 losses widened on higher project costs

  • Starburst Holdings Limited’s (Starburst) 1H16 revenue grew 111.1% YoY to S$7.0m due to the different work phases of projects primarily in the fabrication and installation work phases of Marina One architectural steel project in Singapore, and three firearm shooting range projects in Middle East. 
  • However, 1H16 gross profit only rose 81.3% YoY to S$1.3m as gross margin decreased 1.9 ppt to 8.1% mainly due to additional cost incurred for the Marina One architectural steel project. 
  • As such, 1H16 project and production costs jumped 114.3% to S$13.5m. 
  • 1H16 depreciation expenses and finance costs also increased 85.5% and 104.7%, respectively, mainly due to the purchase of its new leasehold property in Tuas. 
  • Consequently, 1H16 net losses widened 10.2% YoY to S$2.1m. 
  • Given the uncertain outlook over oil prices, we believe Starburst will continue to be impacted by the deferment or reduction in size for projects in the Middle East. 
  • Looking at a weak FY16, we prefer to wait for announcements of confirmed contracts wins in FY16 and expect any resulting revenue to be recognized only from FY17 onwards. 
  • Maintain HOLD with an unchanged FV estimate of S$0.30.




Eugene Chua OCBC Securities | http://www.ocbcresearch.com/ 2016-08-16
OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 0.30 Same 0.30


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