(BUY, S$0.335, TP S$0.71)
Lian Beng Group’s (LBG) 1QFY12 core earnings were in-line with our estimates, with PBT (excluding one-off items) coming in at S$15.1m, up 14% YoY on the back of strong construction demand. 1QFY12 revenue came in 21% higher YoY at S$135.8m. LBG is set to ride on Singapore's current building boom and its ventures in private residential and industrial developments will help boost its bottom line. LBG’s net cash per share of 14.2S¢ would be used for its property business. Maintain BUY with a TP of S$0.71, based on a target P/E of 7x FY12 earnings.
Core earnings in line with expectations. 1QFY12 earnings surged 74.7% YoY, coming in at S$19.1m, mainly on the back of a S$7.9m gain on sale of property. Stripping away the one-off gain, 1QFY12 PBT would still have grown 14% YoY. 1QFY12 revenue jumped 21% YoY to S$135.8m, on the back of a strong performance from LBG’s construction, property development and ready-mix concrete segments.
Acquired Midlink Plaza. LBG, as part of a consortium, bought Midlink Plaza (along Middle Road) for S$126.8m (its effective stake is 19%). The consortium has plans to redevelop this property into a 16-storey hotel with 450-500 guest rooms, pending approvals from the authorities. There is a possibility that LBG may be awarded the job to construct the hotel. However, there is no earnings impact in the near term, since we estimate regulatory approvals for the hotel design may come only eight months from now. Midlink Plaza is a 9-storey stratatitled retail-cum-office development, with gross floor area of 128,076 sqf and is ~200m to Bugis MRT station. The property lies in the heart of URA’s designated district for cultural, educational and entertainment in Bugis.
Strong order books and attractive valuation. On the back of strong order books of S$761m, we estimate LBG’s FY12 earnings to come in at S$53.5m, which suggests a prospective P/E of 3.3x (peers at 6.4x blended FY11 and FY12 P/E). Maintain BUY.
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