Yongnam Holdings - CGS-CIMB 2018-05-15: Winds Of Fortunes Have Yet To Blow In

YONGNAM HOLDINGS LIMITED SGX: AXB

Yongnam Holdings - Winds Of Fortunes Have Yet To Blow In

Yongnam Holdings reported 1Q18 net loss of S$4.6m, mainly on lower revenue, below our expectations.
Continued low level of steelwork and strutting activities led to overhead costs not being fully absorbed.
Order book stood at S$142m as at end-Mar 18, with a lack of major order wins since securing S$22.9m worth of contracts earlier in Feb 18.
Amid lack of progression in North-South Corridor project tenders and Melbourne Metro project development, we believe strut orders would come in 2H18F.

Yongnam reported 1Q18 net loss of S$4.6m on the back of 41% y-o-y lower revenue of S$54m (18% of our full-year revenue forecast). This is after substantial completion of Senoko Food Hub and Jewel Changi Airport projects at end-FY17.
Projects involving structural steelwork that contributed during the quarter include Outram Community Hospital and Evonik plant in Jurong Island, while c.S$19.1m in specialist civil engineering revenue came from Thomson-East Coast Line and the Hong Kong MTR.

As at end-Mar 18, order book stood at S$142m with no major order wins since securing S$22.9m worth of contracts in Feb 18. With the absence of any North-South Corridor project awards as well as lack of progression in the pending Melbourne Metro project year-to-date, we now look to a turnaround in 2H18F.
We believe Yongnam is well-positioned to undertake strut works for these projects and expect more order wins to come its way in 2H18F.

Coupled with the bids submitted for various contracts for the North South Corridor in Singapore, Yongnam is actively pursuing $1.1bn worth of infrastructure and commercial projects in Australia, Hong Kong and the Middle East.
Management is hopeful that some of these projects could be awarded and commence in the later part of this year.

With the delays in the award of various infrastructure contracts that Yongnam is gunning for, we reduce our FY18F EPS forecast by 34.1% and raise our FY20F EPS by 4.5%.
Maintain ADD with a lower Target Price of S$0.56, pegged to 0.8x FY19F P/BV (10% discount to its long-term average of 0.9x).
Key catalysts ahead include contract win announcements.
Downside risks include further project delays.

Colin TAN CGS-CIMB | LIM Siew Khee CGS-CIMB | https://research.itradecimb.com/ 2018-05-15

SGX Stock Analyst Report ADD Maintain ADD 0.56 Down 0.570