Background: Koon Holdings is a civil engineering, construction, reclamation and shore protection specialist. The company listed on the Singapore Exchange’s junior board SESDAQ in 2003 and upgraded to the main board last year. It started as a family-owned construction conglomerate but is now run by professional managers.
Recent development: Koon’s investments into the precast business in Singapore puts it in good stead to benefit from this method of construction in the face of rising labour costs in the construction industry.
Our view:
Earnings to grow. Koon’s recent order flow demonstrates its excellent positioning in the Singapore construction industry. In March, the company secured a $15.25m contract to construct roads, drains, sewers and earthworks at Tampines Logistics Park. This award brings its pure construction orderbook to $74.0m. In April, it won new precast projects with an approximate contract value of $16.3m in total for public housing projects. Its precast orderbook currently stands at $53.2m.
Keeping construction costs down. With the government’s push for increased productivity in the construction sector, precast products are in demand. Developers and contractors are exploring greater use of such products, which simplify construction as well as provide better quality control and higher cost efficiencies.
Cash pile, opportunistic investments Following the sale of its marine logistics business, Koon has $17.9m in net cash earmarked for more acquisitions. It has already purchased a 49% stake in Tesla Holdings for $3.7m. Its 9.9MW diesel power plant in Western Australia will be completed in 2H11.
Cheap by any measure. Koon is undervalued relative to its peers, and trades at only 3.3x. A simple re-rating to sector average PER would boost its stock price by over 60%. Its low trading liquidity has also improved somewhat after the recent 1-for-1 stock split.
Price-to-earnings: 3.3x
Price-to-NTA: 1.3x
Dividend per share / yield: $0.02 / 7.5%
Net cash/(debt) per share: $0.11
Net cash as % of market cap: 41.5%
Share price S$0.265
Issued shares (m) 164..1
Market cap (S$m) 43.5
Free float (%) 46
Recent fundraising Nil
Financial YE December 31
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