Libra Group Ltd - OCBC Investment 2017-08-17: Cease Coverage

Libra Group Ltd - OCBC Investment 2017-08-17: Cease Coverage LIBRA GROUP LIMITED 5TR.SI

Libra Group Ltd - Cease Coverage

  • Slowdown in revenue and PATMI.
  • Better revenue for B&C segment.
  • Challenging operating environment.

YoY decline in 1H17 PATMI 

  • Libra Group reported a 30.2% decline in 1H17 revenue to S$30.8m and PATMI fell 52.5% to S$0.76m. The decline in revenue was due to
    1. lower mechanical and electrical engineering (M&E) revenue by 42% to S$18.3m,
    2. lower manufacturing revenue by 20% to S$6.0m, but partially offset by
    3. higher revenue from building and construction solutions (B&C) segment which increased by 25% to S$6.5m on the back of increasing project realization. 
  • As a result, gross profit was also lower with a slightly lower gross profit margin of 18.3% vs. 19% in 1H16. 
  • Due to lower bonus and incentives incurred during the year, administrative expenses decreased 25%. There was also a slight increase in ‘other income’ to S$1.0m due to a gain on disposal of a factory in Ang Mo Kio.
  • Net result was a slowdown in bottomline.

Contract wins continue 

  • Notably, Libra Group announced that they have won a few contracts with a total value of approximately S$42m. This included
    1. a contract for the proposed new erection of one block of 5-storey residential building along Koon Seng Road,
    2. a sub-contract for the supply, installation, construction, completion and maintenance of architectural works to Lentor Station and
    3. a sub-contract for works at Stevens Station. 
  • Works for the first contract is scheduled to complete in 2018 while the other two are to complete in 2020.

Ceasing coverage 

  • Looking ahead, the group believes that the operating environment remains challenging with continuous pressures on contract value and tough competition for new projects to be secured.
  • Nonetheless, they will continue to focus on cost control while managing the completion of existing projects. They will also pursue investment opportunities beyond Singapore.
  • With that said, due to an internal reallocation of resources, we are ceasing coverage on the stock.

Jodie Foo OCBC Investment | 2017-08-17
OCBC Investment SGX Stock Analyst Report CEASE CEASE BUY 99998 Same 0.190