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:
- a 51-storey building located in the CBD area;
- a nine-storey light industrial and commercial building, and
- 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
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LIM Siew Khee
CGS-CIMB Research
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https://research.itradecimb.com/
2018-11-02
SGX Stock
Analyst Report
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