UE E&C’s revenue and PATMI increased by 12.2% and 9.5% QoQ to S$96m and S$7m respectively in 3Q12 as the pace of construction picked up for its key projects. Revenue was within our expectations, but PATMI was below our estimates. However, we are not unduly worried as gross margin fluctuations are not uncommon in construction projects. We also expect revenue and PATMI recognition to increase further in 4Q12. Meanwhile, we note that its Watercolours EC is only 60% sold since its launch in June this year and may face increasing risk from a new EC site that is scheduled for open tender later this month. This comes as the government rolls out a record number of EC sites to stem the rise of property prices. To account for this risk, we lower our FY13F PATMI by 15%, but continue to value UE E&C’s shares using SOTP valuation. Maintain BUY with lower fair value estimate of S$0.68 (previously S$0.71).
S$7m net profit in 3Q
UE E&C’s revenue and PATMI increased by 12.2% and 9.5% QoQ to S$96m and S$7m respectively in 3Q12 as the pace of construction picked up for its key projects. Revenue was within our expectations, but PATMI was below our estimates. However, we are not unduly worried as gross margin fluctuations are not uncommon in construction projects. We also expect the revenue and PATMI recognition to accelerate further in 4Q12, coinciding with the scheduled completion for two of its key projects – the Ascentia Sky condominium and the Prime Minister Office Building Complex in Brunei.
Potential supply glut in the EC market?
As we look ahead towards FY13F and FY14F, we note that a substantial portion of UE E&C’s construction pipeline is underpinned by three residential projects, i.e. Austville Residences EC (at Sengkang East), Watercolours EC (at Pasir Ris Link) and the recently announced condominium development along Prince Charles Crescent. Of the three projects, Austville units has been fully sold, the Watercolours is about 60% sold, while the Prince Charles Crescent development has not yet been launched. In particular, the Watercolours EC faces substantial competition from adjacent condominium developments such as the Sea Esta, Ripple Bay and Seastrand. In addition, HDB has another nearby EC site (located at Pasir Ris Drive 3 / Pasir Ris Rise) scheduled for open tender this month. With an estimated 600 units from the new site coming into the market, sales for the Watercolours development may slow further in the coming months.
Maintain BUY with lower S$0.68 FV estimate
To account for the increasing headwinds in the property market, we lower our FY13F revenue and PATMI by about 15%. We continue to value UE E&C’s shares using SOTP valuation. Accordingly, our fair value drops to S$0.68 (previously S$0.71). Maintain BUY.
UE E&C’s revenue and PATMI increased by 12.2% and 9.5% QoQ to S$96m and S$7m respectively in 3Q12 as the pace of construction picked up for its key projects. Revenue was within our expectations, but PATMI was below our estimates. However, we are not unduly worried as gross margin fluctuations are not uncommon in construction projects. We also expect the revenue and PATMI recognition to accelerate further in 4Q12, coinciding with the scheduled completion for two of its key projects – the Ascentia Sky condominium and the Prime Minister Office Building Complex in Brunei.
Potential supply glut in the EC market?
As we look ahead towards FY13F and FY14F, we note that a substantial portion of UE E&C’s construction pipeline is underpinned by three residential projects, i.e. Austville Residences EC (at Sengkang East), Watercolours EC (at Pasir Ris Link) and the recently announced condominium development along Prince Charles Crescent. Of the three projects, Austville units has been fully sold, the Watercolours is about 60% sold, while the Prince Charles Crescent development has not yet been launched. In particular, the Watercolours EC faces substantial competition from adjacent condominium developments such as the Sea Esta, Ripple Bay and Seastrand. In addition, HDB has another nearby EC site (located at Pasir Ris Drive 3 / Pasir Ris Rise) scheduled for open tender this month. With an estimated 600 units from the new site coming into the market, sales for the Watercolours development may slow further in the coming months.
Maintain BUY with lower S$0.68 FV estimate
To account for the increasing headwinds in the property market, we lower our FY13F revenue and PATMI by about 15%. We continue to value UE E&C’s shares using SOTP valuation. Accordingly, our fair value drops to S$0.68 (previously S$0.71). Maintain BUY.
No comments:
Post a Comment