Lian Beng - OCBC Investment 2017-01-17: Ceasing coverage

Lian Beng - OCBC Investment 2017-01-17: Ceasing coverage LIAN BENG GROUP LTD L03.SI

Lian Beng - Ceasing coverage

  • 1H17 revenue fell 55% YoY.
  • Reduced share of results of associates and JV.
  • Trading at 37% of NTA.

1H17 affected by associate/JV contributions 

  • Lian Beng Group’s 1H17 revenue fell 54.8% YoY to S$120.0m, mainly due to a decrease in contributions from the construction and ready-mixed concrete segments. 
  • Nonetheless, due to higher profit recognition from the construction division, gross profit dropped by a much smaller 3.8% to S$29.4m. 
  • Other operating expenses increased substantially from S$4.9m to S$8.8m due to an increase in unrealized exchange loss which arose from the revaluation of loans denominated in foreign currency to finance investments in the UK, as well as an impairment loss on 38m shares of Centurion Corporation.
  • The share of results of associates and JV also declined 73.2% YoY to S$12.5m, due to the completion of development property projects namely NeWest, the Midtown, and Midtown Residences. As a result of the above, PATMI dropped 66.7% to S$18.4m.

NTA stands at S$637m 

  • Lian Beng’s investment properties increased 40.5% from FY16 to S$616.0m in 1H17 mainly due to the acquisition of four retail properties located in mature HDB heartland central areas worth S$151m as well as the development cost incurred for 24 Leng Kee Road. 
  • On the other hand, development properties increased by 26.3% from FY16 to S$188.7m in 1H17, mainly due to the increase in development costs incurred for the industrial developments located at Mandai Link and Tampines North Drive 1.
  • Total borrowings increased by 33.7% from FY16 to S$588.9m in 1H17 mainly due to bank loans drawn down to finance the acquisition of the four retail properties mentioned above. Net gearing now stands at 66.6%. 
  • As of its last closing price on 16 Jan, Lian Beng is trading at 37% of its net tangible assets.

Ceasing coverage 

  • The group expects the construction industry outlook to continue to be challenging in the next 12 months with high labour costs from the increases in foreign worker levies and stiff competition. 
  • Due to a redistribution of internal resources, we are ceasing coverage on Lian Beng.

Deborah Ong OCBC Investment | http://www.iocbc.com/ 2017-01-17
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