UOBKayhian on 12 Apr 2012
Valuations
· TA Corporation (TA) is currently trading at 3.2x FY11 earnings and 0.7x FY11 P/B. We view that TA should be trading near S$0.33/share, pegged to the sector average PE of 4.1x.
Investment highlights
· TA is an integrated construction and property developer with projects spanning Singapore, China and Cambodia.
· TA has a 40-year track record in the construction business, holding the highest Building & Construction Authority (BCA) A1 grading (general building) contractor which allows unlimited tender value. Some of its customers include Keppel land, Capitaland, Allgreen, Housing Development Board (HDB) and Ministry of Information, Communications and the Arts (MICA). Currently, the group has a construction orderbook of S$526m under its belt, spanning across 34 months.
· TA also undertakes small to medium residential property projects, targeted at the middle and upper middle markets. It has three projects under development in Singapore, namely Parc Seabreeze, Auralis, Coralis and Starlight Suites as well as one development by associate coined Singapore Garden in Dalian, China. On top of these, TA has numerous landbanks across Singapore, China and Cambodia with planned gross floor area (GFA) of 8,484 sqm, 96,398 sqm and 4,977 sqm respectively.
· For 2011, the group’s revenue rose 17.2% to S$284.7m as it recognised revenue from ongoing residential developments such as Parc Seabreeze, Coralis and Auralis. Revenue from construction business rose 11.8% to S$160.2m due to contributions from projects such as Nouvel 18, Viva, Foresque Residences and Starlight Suites. However, net profit was flat at S$35.8m as TA recorded several non-recurring gains and expenses in 2010 and 2011. These include a fair value gain on investment properties and disposal of available for sale investment of S$5.4m and S$3.7m respectively in 2010 and listing expenses of S$2.3m in 2011. TA Corp also declared a first and final dividend of 1.2 S cents, a payout of 20% of net profit, twice the dividend payout recommended in the prospectus.
Our View
· Macroeconomic factors to cause share price overhand The Urban Redevelopment Authority’s (URA) latest flash estimates indicate that private home prices declined by 0.1% qoq in 1Q12, compared with a 0.2% gain in the previous quarter. Prices in the high-end segment declined the most (-0.9% yoy) impacted by the sharp drop in foreign demand followed by the mid-tier segment which saw a price decline of 0.7%. According to our UOB Kay Hian property analyst, prices are likely to weaken by a further 8-10%. Foreign worker levy and higher raw material prices are also likely to erode gross margins for the group.
Showing posts with label TA Corp. Show all posts
Showing posts with label TA Corp. Show all posts
Friday, 13 April 2012
Monday, 2 April 2012
TA Corporation
Kim Eng on 2 Apr 2012
Background: TA Corporation is engaged in the
construction business and real estate development,
and debuted on the Singapore Exchange last
November with an IPO price of $0.28. It has been in
the construction industry for around 40 years and
holds the highest grading of A1 by the Building and
Construction Authority of Singapore. In 2005, the
group forayed into property development in China and
Cambodia through joint ventures with local partners.
Recent development: TA Corp’s first set of results was slightly disappointing, owing to IPO-related expenses and the absence of one-off gains as in 2010. Revenue was up 17.2% YoY to $284.7m, with higher contributions from the real estate development division. Excluding one-off costs, net profit would have risen by 6% YoY.
Recent development: TA Corp’s first set of results was slightly disappointing, owing to IPO-related expenses and the absence of one-off gains as in 2010. Revenue was up 17.2% YoY to $284.7m, with higher contributions from the real estate development division. Excluding one-off costs, net profit would have risen by 6% YoY.
Healthy construction orderbook. For its
construction business, TA Corp has secured contracts
for two projects from Allgreen Properties for $271m.
Its construction orderbook currently stands at $587m,
to be recognised over the next 34 m onths. For its
property development business, it has three ongoing
projects, ie, Parc Seabreeze, Auralis and Coralis. We
estimate that the pre-tax margins for Parc Seabreeze
and Coralis would be particularly high at over 30%.
This was because the land was acquired through en-
bloc sales and priced at around $450 psf ppr. The
group has proactively replenished its landbank. Its
most recent bid was for the Punggol EC land parcel,
but the bid was sixth in line and 10% lower than the
top bid.
Bumper yield. For FY11, TA Corp doubled its dividend payout, keeping its promise to shareholders. The payout translates to a y ield of 5%. While the company does not have a fixed dividend policy, it has committed to paying out at least 10% of its earnings for FY12.
Depressed valuations across the sector. The stock is trading at FY11 0.67x P/BV and 3.2x PER. Foreign worker levy and the rollout of property cooling measures may have depressed valuations in the construction and property development sectors.
Bumper yield. For FY11, TA Corp doubled its dividend payout, keeping its promise to shareholders. The payout translates to a y ield of 5%. While the company does not have a fixed dividend policy, it has committed to paying out at least 10% of its earnings for FY12.
Depressed valuations across the sector. The stock is trading at FY11 0.67x P/BV and 3.2x PER. Foreign worker levy and the rollout of property cooling measures may have depressed valuations in the construction and property development sectors.
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