Yongnam Holdings - CGS-CIMB Research 2019-05-16: Secures Jobs Worth S$121m In 3 Countries

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

Yongnam Holdings - Secures Jobs Worth S$121m In 3 Countries

  • YONGNAM HOLDINGS LIMITED (SGX:AXB) has secured contracts worth S$120.8m for infrastructure works in Singapore and Hong Kong and for India’s Kempegowda International Airport.
  • The latest order wins bring up Yongnam's orderbook to S$448m – highest in 7 years – and boosts outlook for a potential turnaround to profit in FY20F.
  • Maintain ADD and Target Price of S$0.33, pegged to 0.7x FY19F P/BV.



Five contracts in three countries

  • The contracts include a subcontract for N103 North-South Corridor (NSC) project between Kampong Java Road and Suffolk Walk – to supply, install and dismantle temporary earth retaining systems for the construction.
  • The second civil engineering contract is for infrastructure development in Singapore.
  • The third Singapore contract will involve structural steelwork for a single-user factory.
  • In Hong Kong, Yongnam secured a contract involving strut works for the Tsueng Kwan O – Lam Tin Tunnel Road P2 project.
  • Over in India, Yongnam will install structural steelwork roof for Kempegowda International Airport Terminal 2 in Bangalore.


Orderbook rises to S$448m – highest in 7 years

  • The contract wins add S$120.8m to its orderbook of S$327m as at end-Mar 19.
  • We believe it is tracking our expectations of S$330m order wins for FY19F.
  • Majority of the latest contract wins will commence in 2HCY19 with completion in 12-36 months’ time.


In pursuit of other infrastructure projects

  • Yongnam has bid for JR101 and JR102 contracts for the construction of Jurong-Region Line stations as part of a JV with Daewoo. Tender outcomes are likely to be announced in 2HCY19.
  • Yongnam is also pursuing subcontracts for other parts of the NSC project and various major works for Changi Airport T5.


Boosts outlook for FY20F profit turnaround; maintain Add

  • Target Price of S$0.33 pegged to 0.7x FY19F P/BV (20% discount to long-term avg. of 0.9x).
  • Yongnam currently trades at 0.4x FY19F P/BV, which is 1 s.d. below its 10-year average of 0.9x.
  • Key re-rating catalysts include stronger-than-expected order wins in FY19F.
  • Downside risks include prolonged project delays that could deter a quick profit turnaround.





Colin TAN CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | https://research.itradecimb.com/ 2019-05-16
SGX Stock Analyst Report ADD MAINTAIN ADD 0.330 SAME 0.330



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