BRC ASIA LIMITED (SGX:BEC)
BRC Asia - 3QFY22 Earnings In Line, Benefit From Robust Demand
- BRC Asia (SGX:BEC)'s 3QFY22 (1 Apr 2022 to 30 Jun 2022) revenue gained 18.2% q-o-q to S$515.3m on higher ASP but lower volume, while net profit fell 23.2% q-o-q to S$20.4m.
- During the quarter, construction progress at worksites was disrupted by fatalities, dengue and COVID-related productivity loss. Overall progress payments (i.e. billings) in the construction industry fell 3.8% q-o-q in the June quarter.
- The volume of rebars delivered for the industry declined 30.4% y-o-y from Oct 21-May 22, with a steep 49.2% y-o-y decline for Apr-May 2022. We believe this is representative of BRC Asia’s volume shipment for FY22E (year-end Sep) to date.
- While construction activities picked up from Aug, total volume in the Sep quarter is unlikely to return to the level in March quarter, as the regulator stepped up checks at the worksites. The lower delivery volume will keep inventory high and incur holding costs. However, construction demand remains robust, underpinned by public housing construction to cope with the under-supply and curb run-away home prices. En-bloc transactions have also gained pace, which would spur construction activities.
- A possible near-term risk is the climb in mortgage rates and potential measures to cool the buying fever, hence lowering developers’ appetite for new projects.
- Rebar prices from China have corrected by -24% from the recent peak in May 2022 (RMB5,258/ton), beset by recessionary fears and slowing Chinese economy. The decline since end Jun 2022 was -11.2%.
- However, we believe steel prices will recover due to current low inventory at the LME (London Metal Exchange), the shuttering of China production capacity due to power rationing, and the higher energy prices that lift the cost of production.
BRC Asia - Earnings forecast and recommendation
Peggy Mak
SAC Capital Research
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https://www.saccapital.com.sg/
2022-08-19
SGX Stock
Analyst Report
1.920
SAME
1.920
