PEC growth plagued by competition, pricing pressures and cost concerns

Trio of threats hampering its success.

Here's more from DBS:

1Q13 in line. PEC reported 1Q13 core net profit of S$3.1m (+30% y-o-y) on topline of S$120m (+9% y-o-y), within expectations. While gross margin
expanded 3.4ppts y-o-y to 21.4% on the settlement of variation orders relating to completion of project works, this was offset by 40% y-o-y increase in operating expenses. This was mainly driven by salary increases, consultancy, general admin and accommodation expenses. PEC remained in a net cash position with 46.9 Scts net cash per share

Our View. S$95m orders secured YTD. Notwithstanding the subdued investment climate, PEC managed to secure S$95m of projects in FY13 YTD, vs. our full year assumption of S$300m. We estimate its current net orderbook to be c. S$242m, after accounting for the recent batch of contracts secured worth S$30m. The group notes encouraging project enquiries from Middle East and Asia, with an increase in demand for maintenance services. However, competition remains keen, and pricing pressure and costs continue to pose challenges to the business.

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