Maybank Kim Eng Research, June 11
WE caught up with Lian Beng's management for updates on ongoing construction and property launches, and are now convinced that FY2014 ending May 31 will be a record-breaking year with earnings surpassing its 2012 peak of $51.4 million.
We are also positive that Lian Beng will be able to maintain its dividend payout of two cents a share payable in the next quarter.
We have revised our FY2014 and FY2015 estimates by 8-11 per cent, and applied a higher multiple on its construction earnings. Upgrade to "buy" with a revised target price of 68 cents, indicating upside of 30.8 per cent.
The recent Poh Lian construction problems offered Lian Beng the opportunity to take over the Goodwood Residence construction contract, which is scheduled for completion in October 2013.
Lian Beng's orderbook currently stands at $1.2 billion including Dakota Crescent and Laurels, which if completed on schedule by end- 2013, will free up manpower for further construction jobs.
Since the start of 2013, Lian Beng has secured seven private-sector contracts valued at $739 million.
King Albert Park, Hong Leong Gardens, and Hougang Plaza were launched year to date. Hougang Plaza, now The Midtown and The Midtown Residences, has achieved an average 62 per cent take-up rate.
We expect Lian Beng to begin construction at end-2013, resulting in increased contribution in the second half of FY2014. Seletar Green is expected to be launched the next quarter.
At current levels, Lian Beng is trading at 3.1 times FY2014 PE estimate, versus peers at between five and seven times PE. We peg Lian Beng construction earnings at six times, on a par with its construction peers.
We like Lian Beng for a strong orderbook of $1.2 billion comprising of higher-margin private-sector projects, its latest property launches' with strong sell-through rates and also a healthy buildup in recurrent income. We upgrade to "buy" from "hold".
BUY
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