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
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LIM Siew Khee
CGS-CIMB Research
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https://research.itradecimb.com/
2019-05-16
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