Maintain BUY
Previous Rating: BUY
Current Price: S$0.345
Fair Value: S$0.51
Return to familiar grounds. Lian Beng (LBG) announced earlier this week that it has won two new construction contracts, worth a total of almost S$98m. The bigger S$84.5m contract relates to construction work for Mandai Estate, for which LBG holds a 55% stake in. The smaller, but not less significant, S$13.2m contract was awarded by HDB. It is important as it marks the return of LBG to the public residential construction space, where it first made its name. Given the government's intent to supply more HDB flats, we believe this is a more fertile ground for winning construction contracts than before. Management stated that they will continue to tender for both HDB and private construction projects. With its track records in both public and private construction, we believe LBG will be able to refresh its order book.
Development segment getting bigger. LBG has enjoyed fair bit of success in its development business so far. The sales result (>90% sold after its recent launch around 4QCY11) of the Mandai Estate is an example of its acumen for development investments. In its continuing search for attractive development opportunities, the group recently deployed S$260m to acquire 128,076 sqft of commercial area (Midlink Plaza) and 118,943 sqft of residential area (Dragon Mansions), and this increases its development resources substantially.
Change of valuation method to better account for development segment. In view of these recent additions to its development arm, we believe a SOTP valuation (RNAV approach for LBG's development segment and a multiple based approach to value LBG's main construction business) will be more appropriate, as it will allow for better assessment of the value of the development business. Exhibit 1 shows the summary of our SOTP valuation. Combining both the multiple based approach and our RNAV (50% discount) estimation, we yield a fair value estimate of S$0.51.
Still yields an attractive upside. With the latest contracts win, LBG's net order book goes above S$850m. We continue to like LBG for its strong order book, track record in both public and private residential projects and undemanding valuations. We find that despite applying a discount rate to capture the likely economic slowdown ahead, LBG still appears attractively priced. The updated fair value estimate of S$0.51 (previously S$0.55, lower due to change of valuation method) still shows potential upside of about 46%. Maintain BUY.
1 comment:
pet insurance
If that is not evident, leave your clothes and provisions behind and set out into the woods for a couple weeks' stay. This means that they are suitable for apartment living. They are surely easy to go with most specially with kids and older people since they're endearing.
Post a Comment