Company background: Ryobi Kiso is a leading ground engineering solutions provider specialising in piling services. It is awarded the L6 grading by Singapore’s Building and Construction Authority (BCA) in 2003, allowing it to tender for public-sector piling projects of unlimited contractual value.
Industry outlook: BCA revised its construction demand forecast upwards on 5 August 2011 from $22-$28b to $24-$30b. The revision incorporates an increase in the expected contracts awarded in the public residential sector, following MND’s decision to bring forward HDB BTO projects scheduled for early next year to meet its target launch of 25,000 new units this year. In the revision, construction demand from private industrial properties is also increased.
Key ratios…
Price-to-earnings: 13.3
Price-to-NTA: 0.87
Dividend per share / yield: 0.6 cts / 4.4%
Share price (S$) 0.137
Issued shares (m) 761.3
Market cap (S$ m) 104.3
Free float (%) 27.5
Recent fundraising activities IPO: Jan 10 – Issuance of 192m new shares @ $0.26
Financial YE 30 June
Major shareholders Tanglin Capital – 62.7%, Ong Tiong Siew – 4.9%
YTD change -21.7%
52 week px range S$0.105-S$0.200
Our View
Gross margins halved. Intense competition and a sharp rise in material costs have severely affected gross margins for FYJun11, bringing it down to 19.8% from 38.7% a year ago. The pressure on gross margins is felt industry wide. The latest data from BCA reflected this, the Tender Price Index (TPI) remained at last year’s level despite prices for concrete and steel bars rising by 15-20% over the year.
Healthy order book. Ryobi Kiso has been able to consistently maintain its order book at about $80m over the past two years by replenishing $30-40m worth of contracts every quarter. Its outstanding order book as at end of June 2011 stood at $78.1m, comprising projects from both public and private sectors. In the pipeline, management looks forward to the roll-out of piling projects from main contractors for Downtown Line Stage 3 and HDB.
Overseas operations. Management is keen to expand its operations in Vietnam and Malaysia. Although they contributed little revenue for FYJun11 (compared to 8% in FYJun10), this was due to the completion of a sizable piling project in Vietnam. Management shared that it is working towards a 15-20% revenue contribution from overseas projects. Last month, Ryobi Kiso won a contract in Vietnam for $13.1m.
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