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Lian Beng Group - Phillip Securities 2021-12-03: Navigating A Tough Construction Sector

LIAN BENG GROUP LTD (SGX:L03) | SGinvestors.io LIAN BENG GROUP LTD (SGX:L03)

Lian Beng Group - Navigating A Tough Construction Sector

  • Lian Beng (SGX:L03)’s order book for the construction segment remains strong at S$1.4bn, expected to support construction activities until FY26.
  • Year-to-date September 2021, the value of industry construction contracts awarded has increased 36.7% to S$21.7bn.
  • Lian Beng's diversified portfolio has cushioned the negative impact of the challenging construction industry on the bottom line.



Lian Beng Group - Company Background

  • Lian Beng Group (SGX:L03) was listed on the Mainboard in 1999. It is a building construction and civil engineering company in the public and private sectors and is also involved in the engineering and leasing of construction machinery and equipment.
  • There are four main segments: construction, property development, investment holdings and dormitory.


Key Highlights

  • Strong order book of S$1.4bn. Lian Beng is involved in a diversified portfolio of residential, industrial and commercial properties and civil engineering projects as the main contractor. Even though the COVID-19 pandemic has slowed down the construction sector in Singapore, its current construction order book of S$1.4bn should support construction activities until FY26. In 2021, Lian Beng announced two contracts, worth S$249mil in total, for the construction of residential developments.
  • Construction sector expected to grow to S$23bn-28bn in 2021. The construction segment has been the main revenue contributor, at 83.1% for FY21. According to the Building and Construction Authority (BCA), construction demand has been recovering over 2021, with further recovery expected as construction activities resume. The main driver is expected to be the public sector, which is anticipated to contribute about 65%. This is supported by anticipated stronger demand for public housing and infrastructure projects. year-to-date September 2021, the value of construction contracts awarded has increased 36.7% y-o-y to S$21.7bn.
  • Diversified business segments. Lian Beng’s diversified business segments have managed to cushion the negative impact of lower construction activities on its bottom line. With the property market booming during the pandemic, the property development, dormitory and investment holding segments contributed 94% to profit before tax in FY21, even though they make up only 17% of FY21 revenue.
  • Leveraging technical capabilities to increase efficiency. Lian Beng uses various technologies, including incorporating Prefabricated Prefinished Volumetric Construction (PPVC). This helps to raise productivity, improve site safety and minimise the impact of construction activities on the environment.
  • Consistent dividend payments. Lian Beng has maintained its dividend payouts, even with the challenging environment as a result of the pandemic. Dividend payout ratios averaged 21% over the past five financial years, and were 17.4% and 19.2% in FY20 and FY21 respectively, translating to dividend yields of 2%.
  • See


Lian Beng's Competitors

  • Lian Beng’s status with the BCA as an A1 grade contractor in general building enables them to tender for public-sector building projects of unlimited contract value, while their A2 grade in civil engineering allows them to handle engineering projects of up to S$85mil in contract value.

Construction.

  • In the construction segment, Lian Beng’s direct competitors are other contractors which also hold the A1 grade, competing directly for public and private sector projects that specify a minimum of A1 grading. The construction industry in Singapore is very competitive, and other listed companies which hold the A1 grade include Boustead Project (SGX:AVM), Soilbuild Construction (SGX:S7P). According to BCA, as at 21 June 2021, there were 92 companies under the category of general building (CW01) contractors, and with A1 grade.
  • Lian Beng maintains its competitive edge through taking on a diversified portfolio of construction projects, and completing fabrication of steelwork and reinforcement bars in house, to ensure a steady supply. With its two ready-mix batching plants, Lian Beng is also able to support construction projects that they take on, and also of third parties.
  • Companies with the same A2 grade for civil engineering include Chip Eng Seng (SGX:C29).

Property development.






Vivian Ye Phillip Securities Research | https://www.stocksbnb.com/ 2021-12-03
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998 SAME 99998



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