BRC ASIA LIMITED (SGX:BEC)
BRC Asia - Virus Resurgence Clouds 2H
BRC had a strong 2Q21 (Mar).
- BRC Asia (SGX:BEC)'s 2Q21 (Jan 2021 to Mar 2021) revenue rose 30.9% q-o-q, and 20.5% y-o-y, benefitted from ramp up in order deliveries and higher steel prices. However, net profit was flat q-o-q and y-o-y due to non-cash provisions of S$21m to take in the impact of higher steel price on its orders on hand. This provision will be reversed over-time as BRC Asia hedges all its steel prices.
- Order deliveries picked up post the lockdown in 3Q20 (Apr 2021 to Jun 2021) with greater easing of mobility that enabled more construction activities to resume.
Recent spike in virus community cases had clouded the outlook.
- New entry restrictions on foreign workers from India, Bangladesh, Sri Lanka and Nepal have tightened the supply of labour in the construction sector, derailed construction work and pushed out demand for BRC Asia’s steel products to future quarters. This would set back 2H21 earnings.
- We expect 2H21 net profit to be about 65% of 1H’s.
Still good 3Q21 y-o-y growth due to weak 3Q20.
- 3Q20 (Apr 2021 to Jun 2021) was an exceptionally weak quarter due to 2-1/2 month of lockdown, when BRC Asia incurred net loss of S$2.5m. Assuming no complete lockdown imposed for the rest of this FY, 3Q21 will look comparatively stronger y-o-y, with higher volume deliveries and stronger steel price.
- Steel rebar prices are 5.8% higher year-to-date and +51.4% y-o-y. Rising steel prices have a slight positive impact (with 2 to 3 month lag) for contracts priced at market rates. BRC Asia enters into forward contracts for those contracts priced at fixed rates. Its exposure to fluctuations in steel price is minimal.
We are lowering FY21E net earnings estimates by 17%
Peggy Mak
SAC Capital Research
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https://www.saccapital.com.sg/
2021-05-18
SGX Stock
Analyst Report
1.64
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