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 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.

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