Lian Beng Group

OCBC on 27 Jul 2012

Lian Beng Group (LBG) reported that its 4QFY12 revenue fell 13% YoY to S$111.4m while PATMI remained flat at S$11.5m. LBG’s operating margin climbed an impressive 3.6ppt to 14%, but the impact of one-off items resulted in no growth in its PATMI. Management also recommended final and special dividends totalling S$0.02/share. In full-year comparison, LBG’s revenue in FY12 fell 12% to S$445.0m but PATMI rose 8% to S$52.1m. Revenue growth in ready-mixed concrete was particularly strong, jumping 83% in FY2012. LBG’s order book contracted to S$652m at end-FY12. However, the order book is still robust since it is twice the size of its construction revenue in FY12. We maintain our fair value estimate of S$0.47/share and BUY rating on LBG.

Reasonably strong financial performance in 4QFY12
Lian Beng Group (LBG) reported that its 4QFY12 revenue fell 13% YoY to S$111.4m while PATMI remained flat at S$11.5m. LBG’s operating margin climbed an impressive 3.6ppt to 14%, helping its operating profit to grow 18% YoY to S$15.5m. However, the combination of one-off gains in 4QFY11 and one-off losses in 4QFY12 caused LBG’s PATMI to stay flat. Management shared that the higher profit margins were achieved as a result of better project management. In addition, management recommended dividends totalling S$0.02/share, made up of a final dividend and a special dividend of each S$0.01/share.

Strong growth in ready-mixed concrete
In full-year comparison, LBG’s revenue in FY12 fell 12% to S$445.0m but PATMI rose 8% to S$52.1m. LBG’s construction segment remains its biggest revenue contributor, making up 75% of total revenue. Meanwhile, its ready-mixed concrete and property development segments contributed 17% and 7% to total revenue respectively. Revenue growth in ready-mixed concrete was particularly strong, jumping 83% in FY2012. The strong growth was due to LBG’s capacity expansion and strong demand from the construction sector.

Management stays cautiously optimistic
LBG’s order book contracted to S$652m at end-FY12, from S$742m at end-3QFY12. However, the order book is still robust since it is twice the size of its construction revenue in FY12. Management remains cautiously optimistic of the outlook for Singapore’s construction industry over the next 12 months and said LBG will remain active in tendering for new projects. Management added that construction demand is expected to remain strong, especially from public housing developments, institutional buildings and civil engineering projects.

Maintain BUY
We lower our revenue forecast of LBG in FY13F by 2% but increase our PATMI forecast by 1% to account for slower revenue growth but higher profit margins. Thus, we maintain our fair value estimate of S$0.47/share and BUY rating on LBG.