OUTPERFORM Maintained
S$0.25 Target: S$0.40
Mkt.Cap: S$307m/US$252m
Construction
• In line; maintain Outperform. 2Q11 net profit of S$15m (+13% yoy) meets our estimate and consensus, at 25% of our FY11 estimate with 1H11 EPS forming 49% of our forecast. Quarterly net profit was a record despite lower yoy turnover, helped by better gross margins and a lower cost structure. Contract wins picked up strongly, with the group already securing S$193m worth of contracts in 2Q11 alone, or 40% of our target for this year. Profit margins have been strong and sustainable for 4-5 quarters. No change to our EPS estimates or S$0.40, still based on 8x CY12 P/E, a 20% discount to its mid-cycle multiples. Re-rating catalysts are better margins and further contract wins, in our view.
• Revenue eased on slower-than-expected recognition. The slight yoy decrease in the topline was predictable, with the substantial completion of the remaining projects at MBS integrated resort in FY10. As a result, revenue from structural steelworks decreased to S$42.5m (-15.2% yoy) in 2Q11. The shift in revenue mix towards specialist civil engineering continued, with the segment accounting for 49% of group revenue in 2Q11. Revenue from this segment rose 17.7% yoy to S$40m.
• Better gross margins offset lower turnover. As a result of the shift, YNH’s gross margin increased slightly to 29.6% in 2Q11 (from 29.0% in 2Q10). Four projects were instrumental: 1) Marina Coastal Expressway; 2) MRT Downtown Line 2; 3) Hong Kong MTR; and 4) the New Doha International Airport project.
• Strong order book and earnings visibility. Earnings visibility remained solid, back by an order book of S$509m at end-2Q11. YNH maintained a strong balance sheet with net gearing improving to 0.45x as at end-1H11 (0.49x at end-FY10). We estimate that it is bidding for S$1.2bn worth of projects this year. The outlook in Singapore remains underpinned by numerous opportunities in the civil engineering space, where YNH stands to reap major benefits.
No comments:
Post a Comment