Thursday 14 November 2013

KSH Holdings

OCBC on 13 Nov 2013

2QFY14 PATMI came in at S$12.2m, up 24% YoY and 6% QoQ, mostly due to stronger contributions from both the property development and construction segments. These results were spot on with our expectations as 1HFY14 PATMI now makes up 49.7% of our full year estimates. An interim dividend of 1.25 S-cents per share was declared. Despite a market cap of S$205m, KSH now holds S$76m in cash with a low net gearing of 6.4%. This provides sizable capital headroom for growth, and we continue to like management’s ability to execute on accretive growth opportunities (LTM ROE: 24%) and balanced approach for capital allocation (FY14F dividend yield: 4.8% yield). Maintain BUY with an unchanged fair value estimate of S$0.73. Our fair value is based on 5 times FY14F construction earnings and 40% discount to the property segment’s RNAV.

Earnings momentum continues – 2QFY14 PATMI up 24% YoY
2QFY14 PATMI came in at S$12.2m, up 24% YoY and 6% QoQ, mostly due to stronger contributions from both the property development and construction segments. These results were spot on with our expectations as 1HFY14 PATMI now makes up 49.7% of our full year estimates. Topline for the quarter increased 55.4% YoY to S$89.1m mostly due to higher construction revenue and a larger recognition from Lincoln Suites. An interim dividend of 1.25 S-cents per share was declared.

Healthy order book of S$405.0m
The construction order book stands at S$405.0m as at end Sep-13, which we deem to be a fairly healthy level translating to about 1.6 times LTM construction revenues. Management continues to show ability in replenishing the order book, with new order wins of S$332m in YTD 2013 versus S$163m in 2012. The last contract awarded in Aug-13 was worth S$98.4m for the construction of the NEWest development which is expected to complete within 30 months.

Looking forward to Beijing condo launch
We are keeping close tabs on the anticipated launch of KSH’s 45% Beijing condo project (Liang Jing Ming Ju Phase 4), which will be particularly significant as it is slated to contribute an estimated $23m net earnings upon TOP (est. FY15). KSH’s Singapore developments have performed fairly well to date. As at end Sep-13, the 136-unit NeWest and 142-unit KAP Residences are almost completely sold.

Maintain BUY with unchanged fair value estimate S$0.73
Despite a market cap of S$205m, KSH now holds S$76m in cash with a low net gearing of 6.4%. This provides sizable capital headroom for growth, and we continue to like management’s ability to execute on accretive growth opportunities (LTM ROE: 24%) and balanced approach for capital allocation (FY14F dividend yield: 4.8% yield). Maintain BUY with an unchanged fair value estimate of S$0.73. Our fair value is based on 5 times FY14F construction earnings and 40% discount to the property segment’s RNAV.

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