Yongnam Holdings - CGS-CIMB Research 2018-11-02: Winning More Orders For The Year

YONGNAM HOLDINGS LIMITED (SGX:AXB) | SGinvestors.io YONGNAM HOLDINGS LIMITED (SGX:AXB)

Yongnam Holdings - Winning More Orders For The Year

  • Yongnam has announced it has won S$53.4m worth of contracts involving design-and-build and structural steelworks.
  • We believe Yongnam is recovering from a multi-year low of projects-on-hand; we anticipate a profit turnaround in FY19F.
  • Maintain ADD.



Secured S$53.4m worth of contracts

  • There are four contracts – one design-and-build and three for structural steelworks. All four are in Singapore and are expected to complete in FY19/20F.
  • For the design-and-build contract, Yongnam will undertake main contract works for a four-storey regional headquarters and a two-storey production facility for AAC Optics Solutions Pte Ltd. Works are expected to complete by 1Q20.
  • The other three contracts involve steelworks for:
    1. a 51-storey building located in the CBD area;
    2. a nine-storey light industrial and commercial building, and
    3. a new Health Campus comprising a community hospital, outpatient clinics and nursing homes at Woodlands.
  • These are expected to complete by 3Q19.


Anticipate a profit turnaround in FY19F


  • Based on its last known order book of S$273m as at end-Jun 18, along with earlier order wins of S$23m in July, these contract wins could bring up backlog to c.S$350m.
  • We anticipate a profit turnaround in FY19F as Yongnam recovers from a multi-year low of projects-on-hand.
  • Other upside catalysts could come from taking on major infrastructure works, such as for the North-South Corridor (NSC), which is expected to release two more tender outcomes by this year-end. These will add on to NSC N103 package (worth S$553.8m) that Yongnam already secured via a 30:70 JV with Leighton Contractors earlier in May.


Maintain ADD

  • We leave earnings forecasts unchanged for now. We maintain ADD in view of a robust recovery in FY88F.
  • Key downside risks include project delays.
  • Target price of S$8.88 is pegged to 8.8x FY88F P/BV (a 88% discount to its long-term average of 8.8x).





Colin TAN CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | https://research.itradecimb.com/ 2018-11-02
SGX Stock Analyst Report ADD MAINTAIN ADD 0.450 SAME 0.450



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