Koh Brothers Group Ltd - CIMB Research 2018-01-04: Gunning For North-South Corridor

Koh Brothers Group Ltd - CIMB Research 2018-01-04: Gunning For North-South Corridor KOH BROTHERS GROUP LIMITED K75.SI

Koh Brothers Group Ltd - Gunning For North-South Corridor

  • Koh Brothers (KOH) is an established contractor, developer and civil engineering specialist with construction order book of S$844m as at 30 Sep 2017.
  • Fully-sold Westwood Residences awarded temporary occupation permit (TOP) in Oct 2017.
  • The bulk of its NAV is backed by its investment portfolio; venturing into South Korea property.
  • Trading at 0.52x P/BV as at 30 Sep 17 and at 55% discount to RNAV.

Property developer and civil engineering specialist 

  • Koh Brothers (KOH) is an established contractor, developer and civil engineering specialist in Singapore, with a legacy in drainage management and water resource engineering. 
  • At end-Sep 17, its construction order book stood at S$844m, boosted by the securing of two landmark projects in 2H17 – Circle Line 6 and the Deep Tunnel Sewerage System Phase 2.

Bidding for major North-South Corridor project 

  • According to management, KOH plans to tender for several civil engineering projects relating to the North-South Corridor (NSC), many of which it believes would require the firm’s expertise. The bulk of civil contracts relating to NSC’s tender packages are expected to be awarded in 2018/2019F.

Executive condominium (EC) project awarded TOP in 4Q17 

  • On the development front, its 80%-owned Westwood Residences is fully sold and was awarded TOP in Oct 2017. Management expects to recognise profit from 4Q17F onwards.

97% NAV backed by investment properties; foray into South Korea 

  • Koh Brothers (KOH)’s portfolio includes the 50%-owned Sun Plaza and The Alocassia in Singapore, as well as First City Complex in Batam, Indonesia. These properties provided recurrent income (including its share of Sun Plaza) of S$15.6m in FY16. 
  • The group also marked its maiden entry into the South Korean property market by acquiring a freehold development in Seoul’s CBD area for W95.8bn (~S$119m) via a 45%-owned JV in May 2017.

Trading at 0.5x P/BV and 54% discount to RNAV 

  • Koh Brothers (KOH) had a net debt/equity ratio of 0.29x as at end-Sep 2017. 
  • It paid an FY16 DPS of 0.35 Scts. 
  • KOH trades at 0.52x P/BV (book NAV of S$0.65) and at a 55% discount to RNAV.

Colin TAN CIMB Research | http://research.itradecimb.com/ 2018-01-04
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* This Eyes On the Ground report represents a preliminary assessment of the subject company, and does not represent initiation into CIMB's coverage universe. It does not carry investment ratings and CIMB does not commit to regular updates on an ongoing basis.