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Company background: Hor Kew is a building construction group, providing an integrated range of construction‐related products and services. It is also engaged in property development. Its latest project, Moda at East Coast Road, was launched in December 2009 and to date, has achieved 36% take‐up. It is also seeking to expand into Malaysia by acquiring a 74ha residential and commercial site in Seremban, Negeri Sembilan.
Key ratios…
Price‐to‐earnings: 8.8x
Price‐to‐NTA: 0.53x
Dividend per share / yield: 0.25 cts / 4.2%
Net debt per share: $0.018
Share price S$0.059
Issued shares (m) 775.8
Market cap (S$m) 45.8
Free float (%) 46%
Recent fundraising activities Nil
Financial YE December 31
Major shareholders Hor Kew Holdings – 33%, Aw Leng Hwee – 8.7%, Aw Hoon Hui – 6.3%, Aw Soon Hwee – 6.0%
YTD change ‐26.25%
52‐wk price range $0.055‐S$0.095
Our View:
Rising revenue. Revenue is expected to improve in the coming quarters ($17.2m in 1Q11) arising from work done on a sizeable HDB project in Queenstown worth $156m. We understand Hor Kew is looking to replenish its orderbook by up to $300m this year, mainly from projects in the public sector.
$35m net profit from Moda. Hor Kew’s residential project, Moda at East Coast Road, has a total GFA of nearly 64,200 sq ft. Land cost was low at $320 psf ppr and total development cost is estimated in the region of $720 psf. Sales for the 56‐unit project have been slow since its launch in December 2009 but the 20 units sold so far have achieved an average selling price of $1,300 psf. Moda could bring in a total net profit of $35m when fully sold. The project is expected to complete in 2013.
Steep discount. The stock trades at discount of 47% to its book but the group’s construction business faces the prospect of decreasing margins amid rising material prices and labour costs. It could also face difficulty landbanking at current peak prices should it decide to take on new projects.
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