Tiong Seng Holdings

Kim Eng on 21 Feb 2012


Tiong Seng Holdings (TSNG SP) – Meeting expectations
Previous day closing price: $0.215
Recommendation – Buy (maintained)
Target price – $0.33 (maintained)


Growth in all segments. Tiong Seng reported full-year FY11 net profit of $27.2m, in line with what we had expected. Revenue soared by 64% YoY to $414.5m, from $252.3m a year ago, due to improvements across all business segments. The construction division saw a 55% jump in revenue to $350.7m for the full year, thanks to a higher amount of work done on existing contracts and the commencement of new contracts secured last year. Revenue from sales of development properties also more than doubled to $53.8m as a total of 456 home units were sold in FY11, up from 55 home units the previous year.


New contracts worth $784m. In FY11, Tiong Seng increased its orderbook by a total of $784m, beating our forecast of $600m. The new contracts brought its outstanding orderbook to approximately $1.4b. They comprised high-profile contracts from both the private and the public sectors. The Housing and Development Board (HDB) has awarded Tiong Seng two of its most expensive projects to-date, Waterway Terraces I and II, with a combined contract value of $339m. The company has also won the building contracts for private residential projects such as The Glyndebourne in Bukit Timah, The Luxurie in Sengkang and The Archipelago at Bedok Reservoir.


Raising productivity. The government has implemented a slew of measures to raise productivity in Singapore’s construction sector. This included reducing the foreign worker quota and imposing higher foreign worker levies. Tiong Seng’s investments in technology, such as the building of its pre-cast manufacturing hub, are expected to mitigate the impact from the government’s push. Its fully automated factory, which can double its current output of precast concrete and at the same time reduce labour requirement by 50-70%, has come in for special mention by the government as an example of how the industry can adopt technology to be more productive.
Reiterate Buy. Tiong Seng has announced a full-year dividend per share of 1 cent. Based on the current share price, it implies nearly 5.0% yield. We reiterate our Buy recommendation and target price of $0.33.