KSH Holdings - OCBC Investment 2018-11-19: Order Book Remains Strong

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KSH HOLDINGS LIMITED (SGX:ER0)

KSH Holdings - Order Book Remains Strong

• Order book > S$553m.
• Still primarily a construction play.
• Maintain BUY.

PATMI up 11.6% y-o-y

• KSH Holdings’ (KSHH) 2QFY19 PATMI increased 11.6% y-o-y to S$4.4m, lower than our initial expectations due to a sharp decrease in construction margins during the quarter.
• Revenue increased 58.2% or by S$12.9m to S$35.2m while profit from operations (before share of results from associates and JVs) dropped by S$1.4m y-o-y to S$1.2m mainly due to a higher cost of construction. However, the share of results from JVs and associates increased by S$1.5m y-o-y to S$3.4m due to an increase in profit recognised from High Park Residences, and the gain from disposal of subsidiaries by an associated company, which held strata units in Prudential Tower.
• PBT ended flat at S$4.7m (up 1.6% y-o-y) while PAT increased 9.9% y-o-y to S$4.5m on the back of lower income tax. Do note that y-o-y changes mentioned here are against restated 2QFY18 figures, while the FY18 figures in our report have yet to be restated.
• We continue to expect FY19 to end with positive PATMI growth over the restated FY18.

Order book above S$553m as at 30 Sept 2018

• KSH Holdings announced on 24 Aug that it has secured a S$266.3m contract to build nine 17-storey apartment blocks at 35%-owned Riverfront Residences, which is expected to complete in 2022. With the S$53.8m and S$28.0m construction contracts awarded earlier in Aug, KSHH’s order book stands at > S$553.0m as at 30 Sept 2018, and is to be progressively recognised up to FY2022.
• With partners, KSH has launched the sale of three projects so far in FY19: Affinity at Serangoon (18.4% units sold) in Jun; Riverfront Residences (49.5% sold) and Park Colonial (62.5% sold) in early July 2018. According to the press release, prices achieved were within expectation.
• Looking ahead, the group is cautiously optimistic on the outlook of its performance for FY2019. As primarily a construction company, we believe KSH Holdings stands to benefit further from the upcoming pipeline of en-bloc re-developments.
• After adjustments to our full-year forecasts, our fair value decreases from S$0.94 to S$0.81. Maintain BUY on KSH Holdings.

Eli Lee OCBC Investment Research | https://www.iocbc.com/ 2018-11-19

SGX Stock Analyst Report BUY MAINTAIN BUY 0.81 DOWN 0.940