Soilbuild Construction Group - CIMB Research 2018-04-09: Leading Builder In Singapore

Soilbuild Construction Group - CIMB Research 2018-04-09: Leading Builder In Singapore SOILBUILD CONSTRUCTION GRP LTD S7P.SI

Soilbuild Construction Group - Leading Builder In Singapore

  • Soilbuild is a builder with more than 40 years of experience in the Singapore market.
  • Its subsidiary Soil-Build (Pte) Ltd, has an A1 grade from the Building and Construction Authority, allowing it to tender for public sector projects of unlimited value.
  • Its order book as at 31 Dec 2017 was S$451.9m.
  • Soilbuild stated it sees stiff competition in Singapore but healthy demand in Myanmar.
  • Soilbuild is trading at FY17 P/BV of 1.12x and dividend yield of 3.27%.

A1 Contractor 

  • Soilbuild Construction Group is a leading builder with a long and successful track record of constructing an award-winning portfolio of residential and business space properties. 
  • Since its inception in 1976, Soilbuild has garnered over 40 years’ experience offering a full spectrum of real estate services including Design and Build, Construction, Turnkey Construction, Project Management Consultancy, Procurement and Mechanical & Electrical Installation.

FY17 Performance 

  • Singapore contributed 91% of Soilbuild’s FY17 revenue, while Myanmar contributed the remaining 9%. In FY17, the major revenue contributors were public housing developments and commercial projects. 
  • Soilbuild suffered negative gross margin in FY17 though due to higher construction costs for certain projects in Singapore, as well as cost overrun. 
  • It secured S$309.1m worth of construction projects in FY17.

Important Industry Change 

  • The Singapore government is promoting its Design for Manufacturing and Assembly (DfMA) initiative. By 2020F, the government aims to achieve 40% adoption rate for DfMA.
  • By 2019F, all public housing projects in Singapore will be fitted with prefabricated bathroom units, while 35% of public housing projects will be built using Pre-fabricated Pre-finished Volumetric Construction (PPVC) method. Since 2014, PPVC has been selectively mandated for non-landed Government Land Sale sites.

Integrated Construction and Pre-fabrication Hub (ICPH) 

  • To address this regulatory change, Soilbuild has built an ICPH in Singapore, which is due to be operationally ready in 2QFY18F. Soilbuild’s ICPH is the third of four such hubs that were awarded by the Singapore authorities. 
  • Soilbuild has also acquired CS Corp Pte Ltd, which has developed a concrete PPVC system that has been granted in-principle acceptance for use in building projects in Singapore.

Further expansion in Myanmar planned 

  • Soilbuild entered the Myanmar market in 2012, starting as a consultant providing project management services. Revenue contribution from Myanmar projects increased by 76% yoy to S$21.2m in FY17. As at end-Dec 2017, Soilbuild had an order book of S$176m of construction projects in Myanmar. The group intends to participate in more tenders in the country, particularly for industrial and commercial buildings, factories and warehouses.

Outlook, according to the company 

  • Soilbuild expects stiff rivalry to continue in the Singapore market, with competitive bid prices and compressed margins. The group plans to participate more in tenders for the construction of industrial buildings in Myanmar, where the group sees healthy demand.
  • The group’s integrated construction and precast hub is scheduled to commence operations in 2QFY18F. Its order book as at end 31 Dec 2017 was S$451.9m.

Historical valuations 

  • Soilbuild is trading at FY17 P/BV of 1.12x and dividend yield of 3.27%. 
  • Soilbuild incurred net loss in FY17.

Target Price: N/A

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

William TNG CFA 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.