Yongnam Holdings - CIMB Research 2018-02-02: Kickstart To The Year With Order Wins

Yongnam Holdings - CIMB Research 2018-02-02: Kickstart To The Year With Order Wins YONGNAM HOLDINGS LIMITED AXB.SI

Yongnam Holdings - Kickstart To The Year With Order Wins

  • Yongnam has secured four contracts worth S$22.9m mainly comprising steelwork projects in Singapore, which will add to its order book of S$208m as of end-Sep 17. Order wins attest to Yongnam’s reputation and track record for structural steelwork.
  • We expect more order wins to come with several major projects involving struts and steelworks in the pipeline. 
  • Maintain ADD with Target Price of S$0.53.

Kickstart to the year with S$22.9m order wins

  • Yongnam announced on 1 Feb that it has secured four contracts worth S$22.9 million of projects. One of the contracts will involve supplying and erecting structural steelworks for a basement development within the upcoming Health City Novena and is expected to complete in early-2019. The other three contracts comprise demolition work for Bright Hill Station (Thomson-East Coast Line) and steelworks for both Keppel Station and Cantonment Station (Circle Line 6) for completion in 2018 and 2023.
  • We believe these order wins attests to Yongnam’s capability and reputation in the civil engineering space and represent a start to a potential flow of order wins that could come in 2018-19F as construction activity for several major public infrastructure projects is expected to rise this year.

More order wins yet to come

  • Steel and strutting works for Kim Chuan Depot Extension and the Melbourne Metro Tunnel project are still on the cards, according to management. Although talks are taking longer than initially expected, management is confident that a positive outcome from these potential projects could be reached in the first quarter this year.
  • The upcoming North-South Corridor project could provide over c.S$500m worth of strut works; we expect Yongnam to clinch at least 50% of the work as a subcontractor.
  • Other overseas projects potentially in the pipeline include Kai Tak Central and Tuen Mun Expressway in Hong Kong as well as West Gate Tunnel in Victoria, Australia.
  • These projects will require struts for underground and tunneling works for which Yongnam is gunning for this year.

Maintain ADD and target price of S$0.53

  • The latest order wins are within our expectations and represent 12% of our estimated S$186.6m worth of projects relating to steelworks in FY18F. We expect Yongnam to continue winning more orders this year with major public infrastructure projects such as Circle Line 6 and North-South Corridor Corridor in the works. 
  • We expect an order book of S$500m to be achieved by end-FY18.
  • Our Target Price is unchanged and based on 0.8x FY18F P/BV, a 10% discount to its 9-year average. 
  • Downside risks could come from project delays.

Colin TAN CIMB Research | LIM Siew Khee CIMB Research | http://research.itradecimb.com/ 2018-02-02
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 0.530 Same 0.530