SAPPHIRE: Order book hits record high of RMB873 m

Sapphire’s order book hits record high (15 Jul 16)

Sapphire’s order book hit a record high with RMB873m of worth of infrastructure contracts won on 14 Jul 2016. It seems to be evolving into a serious infrastructure play. However, it is still an under researched, under noticed stock, judging from the lack of liquidity and zero analyst coverage.

Teh Wing Kwan, Group CEO & MD of Sapphire. NextInsight file photo.
Noteworthy points on the contracts won

On 14 Jul 2016, Sapphire announced that it has clinched RMB873m worth of infrastructure contracts through its engineering, procurement and construction subsidiary, Ranken Infrastructure Limited. There are some noteworthy points in this announcement.

a)    RMB 300m Jian Cao Ping flyover & RMB 313m to construct part of the Urumqi Rail Transit are won, due in part to their existing contracts. This is a sound testament to Ranken's capability and track record;

b)      With these significant contract wins, Sapphire’s order book increased from RMB2.0b (according to 1QFY16 press release) to RMB2.75b (as of now). This is the highest order book announced which corroborates the positive macro industry outlook on infrastructure and management’s positive view on Ranken.

c)  Sapphire mentioned that they are in talks with governments in South Asia. This direct contact with the governments is a strong plus point. Personally, from my simplistic “outsider view”, I surmise that since they are talking directly to the governments, instead of a partner, who in turn talks to the government, there is a higher chance of getting the contracts. Furthermore, with a direct connection with the local governments, it is likely that they will have greater visibility of project award and execution.

Yesterday, Sapphire announced the incorporation of a wholly owned subsidiary, Mancala Holdings, and an update on its mining business, Mancala. (Click HERE). Sapphire explained the primary objective for the incorporation of Mancala Holdings is to facilitate future fund raising exercises for the mining services business of the Group, which may eventually lead to a dilution of the Group’s shareholding in Mancala. If such funding materialises, it will show to the investment community that Sapphire is mainly focusing their time, resources and energies on their infrastructure segment. In other words, it is really a serious infrastructure player

”My personal view is that 2QFY16F results is likely to be crucial in a couple of aspects:

a)     2QFY16F results are likely to be announced between 11 - 15 Aug 2016. Together with 4QFY15 and 1QFY16, the investment community will be able to have a sense of Ranken's results and whether these results are sustainable and improving;

b)    2QFY16F results, together with 4QFY15 and 1QFY16 and coupled with the rising order book, will also increase the investment community’s confidence in Sapphire’s management.

Look forward to Sapphire’s results!"