Ley Choon Group Holdings - CIMB Research 2018-04-09: Deleveraging In Progress

Ley Choon Group Holdings - CIMB Research 2018-04-09: Deleveraging In Progress LEY CHOON GROUP HLDG LIMITED Q0X.SI

Ley Choon Group Holdings - Deleveraging In Progress

  • Established in 1990 as a one-stop underground utilities infrastructure provider based in Singapore.
  • About 80-85% of Ley Choon’s FY3/17 revenue was contributed by underground utilities works, of which c.65% is related to water piping contracts from the Public Utilities Board.
  • The company stated it continues to focus on improving efficiencies and reducing overheads as part of ongoing debt restructuring agreement undertaken in 2016.
  • Ley Choon is trading at 5.8x FY17 P/E and 1.3x FY17 P/BV.

One-stop contractor in cable/pipe laying and road reinstatement 

  • Ley Choon Group Holdings is a Singapore-based one-stop underground utilities infrastructure service provider established in 1990. Its core business comprises sewer pipeline rehabilitation, road and airfield construction and maintenance, asphalt premix production and construction waste recycling. 
  • The pipe and road segments contributed 92% of total revenue for FY17 with the remaining revenue attributed to the Construction Materials segment.

Stable repeat customer base 

  • Ley Choon’s customers mainly comprise statutory boards of the Singapore government such as the Public Utilities Board (PUB) and companies such as Changi Airport Group (unlisted) and PowerGas (unlisted). 
  • Apart from laying gas and sewer pipes, the group has also undertaken maintenance/resurfacing works for roads and taxiways at Changi Airport.

Market leader in water pipe laying 

  • Water pipelines in Singapore are generally categorised into two types: the bigger transmission steel pipes and the smaller distribution pipelines to households. 
  • Ley Choon believes it has the leading market share of c.60% in the supply and installation of water transmission steel pipes business in Singapore, while its market share is likely less than c.50% for the water distribution pipes segment, which is more competitive.

More prudent in bidding for tenders ahead 

  • Ley Choon is optimistic on securing more water pipe contracts from PUB in 2018, although the company said it would be more selective on bidding for tenders to ensure decent profit margins as competition remains stiff.

Deleveraging ongoing 

  • As part of the debt restructuring agreement that includes a cash sweep mechanism undertaken in 2016, all operating cash earned above S$8m will be used for loan repayments. 
  • Ley Choon is required to make a lump sum repayment for the total loan amount on Mar 2021. As at end-Dec 2017, Ley Choon had total debt amounting S$59.6m.


  • The company said it will continue to tender for new projects amid the backdrop of healthy construction demand in the public sector, which will be fuelled by upcoming mega infrastructure projects. 
  • Unfulfilled order book based on secured contracts stood at S$155m as at Feb 2018. This includes contract wins worth a total S$36m for the replacement of water mains, as well as the supplying and laying of NEWater main in Dec 2017 to Jan 2018.

Historical valuations 

  • Ley Choon is trading at 5.8x FY17 P/E and 1.3x FY17 P/BV. It underwent a debt restructuring exercise and did not declare a dividend in FY17.

Target Price: N/A

(This report is linked to Singapore Construction Companies - CIMB Research 2018-04-09: Key Takeaways From Conference)

Colin TAN CIMB Research | http://research.itradecimb.com/ 2018-04-09
CIMB Research SGX Stock Analyst Report NOT RATED Maintain NOT RATED 99998 Same 99998

* This Eyes On the Ground report represents a preliminary assessment of the subject company, and does not represent initiation into CGS-CIMB's coverage universe. It does not carry investment ratings and CGS-CIMB does not commit to regular updates on an ongoing basis.