Robust construction demand lifts Lian Beng outlook

All set to secure more contracts.

OSK-DMG said that Lian Beng Group boasts of a positive outlook because it will likely clinch more contracts in the near future given the upswing in construction appetite in Singapore in bother private and public sectors.

Here's more from OSK-DMG:

Margin squeeze. LBG achieved a lower gross margin of 10.4% in 4QFY13, vs 17.6% in 4QFY12, due to higher raw material costs and lower revenue in the higher-margin property development segment. This pushed PATMI lower. LBG declared a dividend of SGD0.01 per share and a special dividend of SGD0.0025 per share.

Earnings to climb as M Space obtains TOP. LBG’s 55%-owned industrial development M Space, which has been fully sold, is expected to obtain its temporary occupation permit (TOP) in FY14. Once the TOP is obtained, LBG would be able to recognise the sales revenue, which would boost the Group’s FY14 earnings.

Healthy orderbook backed by positive outlook. LBG’s current orderbook of SGD1.3bn is expected to last till FY16. Within the first half of this year, LBG had secured nine contracts totalling SGD950m. The speed at which the Group secured contracts is a testament to its strong capabilities. We see positive outlook for the construction sector, with rising construction activities in both the private and public sectors. This should lend support to LBG’s orderbook growth.

Maintain BUY, with SGD0.70 TP. LBG currently trades at 4.9x FY14 earnings. Our SGD0.70 TP is based on 6x FY14 earnings. We like LBG for its strong orderbook, which will continue to be supported by the heightening construction activities in both the private and public sectors.

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