(BUY, S$0.39, TP S$0.715)
Lian Beng Group’s (LBG) 4QFY11 earnings were in-line with our estimates, coming in at
S$11.6m, up 73.8% YoY, on the back of strong construction demand. FY11 was a record year,
with earnings hitting S$48.2m, well within our expectations of S$47.6m. LBG is set to ride on
Singapore's current building boom, from both public and private projects and its ventures in
private residential and industrial developments will help boost its bottom line. Despite the 8.3%
run up in price over the last two weeks, it still trades at 3.8x prospective P/E - cheaper than its
peers. Maintain BUY on a higher TP of S$0.715 (83.3% upside), based on a target P/E of 7x
FY12 earnings.
Earnings in line with expectations. 4QFY11 earnings surged 73.8% YoY to come in at
S$11.6m. 4QFY11 revenue jumped 21% YoY to S$127.4m, on the back of strong construction
demand. FY11 earnings more than doubled YoY, leaping from S$24m to S$48.2m, making
FY11 a record year for earnings.
Strong order book of S$839m. As at May 2011, LBG has a healthy order book of S$839m (up
from S$661m in Feb 11). The contracts will run till FY14, lending some visibility to its earnings.
LBG’s cash hoard, which stands at S$149.9m, will allow it to grow its property development
business.
Dividend doubled. With its growing order book, strong financial position and earnings visibility,
LBG has declared a total of 1.6S¢ per share as dividends (1S¢ as first and final, 0.6S¢ as
special dividend), up from 0.8S¢ last year (0.4S¢ as first and final, 0.4S¢ as special dividend).
This translates to a decent dividend yield of 4.1%.
Attractively valued at 3.8x FY12 P/E. On the back of strong construction demand and LBG’s
strong track record of project wins (it secured two projects worth S$279.5m in Jun 11), we
estimate LBG’s FY12 earnings to come in at S$54.1m, which suggests a prospective P/E of just
3.8x, versus its peers which are trading at ~5x. We roll over our valuation to 7x FY12 EPS and
derive a higher TP of S$0.715 (S$0.67 previously).
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