KSH Holdings - OCBC Investment 2017-05-30: FY17 Results Broadly Within Expectations

KSH Holdings - OCBC Investment 2017-05-30: FY17 Results Broadly Within Expectations KSH HOLDINGS LIMITED ER0.SI

KSH Holdings - FY17 Results Broadly Within Expectations

  • Healthy S$340m order book.
  • 1-for-4 bonus shares.
  • Seeking approval for Gaobeidian launch.

FY17 PATMI down 33.4% YoY to S$41.0m 

  • KSH’s FY17 PATMI (ending Mar 2017) decreased 33.4% to S$41.0m mostly due to weaker contributions from its construction segment and lower share of results from associates (which fell 82.5% YoY to S$8.49m). 
  • We understand that, in addition to weaker profit recognition from development projects, the group’s share of results from associates also suffered from S$3.9m of preliminary costs incurred on the Gaobeidian project and a S$3.6m provision for impairments on unsold projects. 
  • In terms of the topline, FY17 revenues similarly decreased 18.8% YoY to S$199.3m primarily due to lower construction contributions. 
  • Overall, excluding one-time items, we judge these results to be broadly within expectations. The group proposed a final and special cash dividend of 1.5 S-cents and 0.5 S-cents, respectively, which brought total dividends in the financial year to 3.25 Scents.
  • In addition, management has also proposed to issue one bonus share for every four existing shares.

Healthy order book at S$340m 

  • As at end Mar 2017, KSH’s construction order book stands at a healthy S$340m after winning a S$145.7m contract from NUS for a 16-floor research building. 
  • Looking ahead to FY18, KSH has soft launched its freehold housing project, 121 Collection on Whitley, and is looking to launch its Geylang project. The group has also taken a 35% stake in the en-bloc acquisition of Rio Casa in Hougang for redevelopment. In addition, management reports that 97.5% of Prudential Tower has been sold as at end Apr 2017, for which KSH’s share of profits is expected to be recognized over the next financial year. 
  • In China, we understand that the group is waiting for approvals to launch Phase 1 of its Gaobeidian project (5,540 units) which will be released for sale progressively. 
  • After updating our valuation model for the latest assumptions and new projects, our fair value estimate increases to S$0.86 from S$0.61 previously.
  • That said, given the strong run up in the group’s share price over the year to date, our rating is downgraded to HOLD on valuation grounds.

Eli Lee OCBC Investment | http://www.ocbcresearch.com/ 2017-05-30
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