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

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.
  • Maintain ADD with a lower Target Price of S$0.56.



1Q18 marred by continued low level of activities

  • 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.


Look towards 2H18F for significant uptake in order book

  • 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.


Actively pursuing S$1.1bn worth of infrastructure projects

  • 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.


Maintain ADD with lower Target Price of S$0.56

  • 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



Advertisement



MOST TALKED ABOUT STOCKS / REITS OF THE WEEK



loading.......



ANALYSTS SAY


loading.......