KSH Holdings - OCBC Investment 2017-11-15: Lower Contributions From Construction Segment

KSH Holdings - OCBC Investment 2017-11-15: Lower Contributions From Construction Segment KSH HOLDINGS LIMITED ER0.SI

KSH Holdings - Lower Contributions From Construction Segment

  • KSH Holdings 1HFY18 results in line.
  • 1.0 S-cents interim cash dividend.
  • Maintain HOLD.

1HFY18 net profit decreased 44.3% to S$10.1m 

  • KSH Holdings reported that its 1HFY18 net profit decreased 44.3% to S$10.1m mostly due to lower contributions from the group’s construction segment, partially offset by a 10.3% improvement in rental income from investment properties. 
  • In particular, we saw a stronger performance from the Tianjin Tianxing Riverfront Square commercial property investment in the PRC. 
  • Helped by project selection and management, margins at the group’s construction division improved to 28.6% compared to 14.0% a year ago. Total expenses also declined 62.1% due to productivity and technology initiatives. 
  • Share of results of JVs rose over eight times to S$4.7m due to contributions from the High Park Residences project. Share of results from associates, however, cumulated to a S$3.5m loss due to provision for losses on development projects.
  • Overall, we deem this set of results to be broadly within expectations. 
  • An interim cash dividend of 1.0 S-cent per share was declared.

Poised to take advantage of SG residential turnaround 

  • KSH Holdings is sitting on approximately S$126.8m of attributable share of progress billings that will underpin sales revenues ahead. 
  • In addition, management reports that they are poised to take advantage of the turnaround in the Singapore real estate sector after recently replenishing their landbank with the joint acquisition of Serangoon Ville, a land parcel at Woodleigh Lane in the Bidadari estate, and also Rio Casa in Hougang. 
  • In Australia, the group has, together with its partners, sold its St Kilda Road property in Melbourne for A$34.0m and will recognize its share of profits before the end of this financial year, subject to legal completion of the transaction. 
  • In the UK, KSH has started on the first phase of its township development in Leeds and also also acquired a four-storey Dry Bar terraced building in Manchester for conversion into a new boutique hotel. 
  • We update our valuation model for the latest results and assumptions and our fair value estimate increases to S$0.79. Maintain HOLD.

Eli Lee OCBC Investment | http://www.ocbcresearch.com/ 2017-11-15
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 0.790 Up 0.690