28 November 2014

Keong Hong Full Year Report Summary - November 2014

Keong Hong recorded total revenue of S$272M, an increase of 85% yoy compared to previous year, but net profit dropped by 10% to S$20M. Gross profit margin and net profit margin are 11.12% and 7.21% respectively. The decrease in profit margin is mainly due to the product mix and increase in construction costs admist intense competition as well as higher labor costs due to government labor tightening policy. 

The company announced a final 1.25 cents dividend or total 2.25 cents dividend, which translated to 5.7% full year dividend yield based on the market price of 39 cents, and PE ratio and PB ratio are 4.6X and 1.14X. 



The company comment on its financial performance:


During FY2014, the Group secured a S$118.0 million building contract to construct the 378-unit Executive Condominium The Amore at Edgedale Plains in Punggol Central. Construction work on the 17-storey executive condominium has commenced and the project is expected to be completed by November 2016. The Group holds a 15% interest in this executive condominium development, which will be launched in December 2014.

In the same period, the Group was also awarded the joint tender with FCL Tampines Court Pte. Ltd., a wholly-owned subsidiary of Frasers Centrepoint Limited, for a land parcel at Sembawang Avenue for a new executive condominium project. This will be the Group’s fourth residential development since its maiden foray into property development in 2012.

Construction work on the Group’s first hotel development in Singapore, namely the 131-room Hotel Indigo Singapore Katong and the 451-room Holiday Inn Express Singapore Katong have also commenced. Both hotels are expected to open in 2016.

As at 30 September 2014, the Group has an order book on construction projects of approximately $463 million, supported by a pipeline of projects which includes Alexandra Central, J Gateway, Twin Waterfalls, SkyPark Residences and The Amore. Construction projects which will receive the Temporary Occupation Permit (“TOP”) in the coming months include Paterson Collection and The Twin Waterfall.

To mitigate the risk of increasingly challenging environment, we have taken steps to form strategic partnerships and alliances with reputable industry players to take on property and hotel development projects. Our overseas ventures in Maldives will also provide an alternate revenue stream that will add to the Group’s overall competitive business position. Moving forward, we will continue to actively seek new contracts to replenish our order books and to explore opportunities locally and overseas to grow our business.

The Group has an order book on construction projects of approximately $463 million as at 30 September 2014, supported by a pipeline of projects which includes Alexandra Central, J Gateway, Twin Waterfalls, SkyPark Residences and a 378-unit executive condominium at Edgedale Plains.


My Comments:

The Company is moving forward to venture higher profit margin business - property development and property investment in Singapore as well as in Maldives, via joint ventures with established developers such as FCL. I believe that this is a good move as it will indirectly secure certain construction projects from JV companies, at the same time creating a better profit margin income stream to the company.

The company also look for better interest yield for its excess cash by investing in convertible bond in other listed company. While I am still not very sure how it is going to do with creating synergies among other listed company, I believe that this is another way of investing excess cash in other company, and it may provide certain competitive advantages (perhaps better discounts??). 

The company is having plenty of cash (S$38M) that definitely can support its working capital requirement and investment requirement. (That is why it is able to pay for a loan to JV and associate companies). Although we cannot see any significant contribution from JV and associated companies, but I believe that it will provide sizable income in near future once the JV projects are completed from FY2015 onwards.

With current market cap of below S$100M, I believe that it is certainly an undervalued company, as it is not under many analyst coverage due to its limitation - under catalyst category as well as low trading volume that hardly attract institutional buyer interest.

Nonetheless, I believe that with current 5.X% trailing dividend yield and slightly higher PB ratio, it definitely is under my watch list and I will monitor it closely and act on it based on market condition.

1 comment:

  1. Keong Hong Full Year Report Summary - November 2014 great info about this and I hope in the coming years they will have a better result. Goodluck

    ReplyDelete

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