YONGNAM HOLDINGS LIMITED
AXB.SI
CSC HOLDINGS LTD
C06.SI
LEY CHOON GROUP HLDG LIMITED
Q0X.SI
TIONG SENG HOLDINGS LIMITED
BFI.SI
SOILBUILD CONSTRUCTION GRP LTD
S7P.SI
TA CORPORATION LTD
PA3.SI
Construction - Key Takeaways From Conference
- We hosted eight construction companies for our SGX-CGS-CIMB Construction & Infrastructure Day conference on 6 Apr 2018.
- Construction companies were generally optimistic on 2018 outlook as they expect higher construction demand this year.
- Payment performance improved in 1Q18, signalling that construction companies could take on more projects in 2018 amid shorter cash cycles.
- Tender price index seems to be bottoming, although competition remains keen, in our view.
- Maintain sector Overweight. Yongnam remains our preferred sector pick.
Key highlights from Construction & Infrastructure Day
- Eight Singapore companies attended our SGX-CGS-CIMB Construction & Infrastructure Day, with c.35 institutional investors participating in group meetings with various management teams.
- Most senior management were optimistic on the outlook for 2018, as they expect higher construction demand from a slew of en-bloc projects to be relaunched and major infrastructure projects.
Upbeat on construction contracts picking up in 2H18
- With the Building and Construction Authority (BCA) projecting the value of construction contracts awarded this year to rise, several companies are optimistic on replenishing their order books in 2H18.
- The construction companies are generally positive on taking on more construction projects in 2018, in view of the slew of en-bloc projects that could be relaunched soon and upcoming mega infrastructure projects, including North-South Corridor, Changi Airport Terminal 5 and KL-Singapore High-Speed Rail (HSR).
Overall payment performance improved in 1Q18
- According to the Singapore Commercial Credit Bureau, the level of slow payments in the construction sector showed marked improvement from 56.8% in 4Q17 to 49.1% in 1Q18, with the heavy construction sub-sector reporting shorter payment delays. If payment performance within the sector continues to improve throughout 2018, we think this would shorten construction companies’ cash cycles and boost their capacity to take on more projects.
Tender price index bottoming out
- The BCA tender price index appears to have bottomed after reaching a low of 96.2 in 2Q17 and settling at 96.7 overall for 2017.
- We expect construction costs to bottom out in 2018, although companies reported that competition is still keen in their respective segments such as geotechnical engineering and other civil engineering works.
We remain upbeat on sector outlook for 2018; maintain Overweight
- We stay sector Overweight. We prefer specialist civil engineering firms that have established track records for their niche expertise.
- Yongnam (YNH SP, Add, Target Price S$0.57) remains our preferred sector pick.
- Key sector risks include delays in awarding projects and heightened competition.
Company Reports
- Yongnam Holdings - CIMB Research 2018-04-09: Expect More Contract Wins In 2018
- Tiong Seng Holdings Ltd - CIMB Research 2018-04-09: Early Adopter Of Prefab Technology
- TA Corp - CIMB Research 2018-04-09: Established Construction Company
- Soilbuild Construction Group - CIMB Research 2018-04-09: Leading Builder In Singapore
- Ley Choon Group Holdings - CIMB Research 2018-04-09: Deleveraging In Progress
- CSC Holdings - CIMB Research 2018-04-09: Upbeat On Turnaround In 2018
Colin TAN
CIMB Research
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LIM Siew Khee
CIMB Research
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William TNG CFA
CIMB Research
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http://research.itradecimb.com/
2018-04-09
CIMB Research
SGX Stock
Analyst Report
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