Excerpts from OCBC report

Analysts: Deborah Ong & Andy Wong, CFA

Recap of FY18 results
KSH Holdings’ (KSHH) FY18 revenue fell 33.4% YoY to S$132.6m mainly due to lower construction revenue resulting from delays in handover of two construction sites.

KSH choocheeonnKSH executive chairman Choo Chee Onn. Photo: CompanyNonetheless, construction margins remained healthy, rising to 23.8% in FY18 compared to 21.6% in FY17.

Profit from operations before share of results of JVs and associates fell 18.4% YoY to S$26.7m.

Share of results of JV rose to S$11.1m, almost doubling YoY, while share of results of associates clocked a S$3.1m loss versus the S$8.5m profit in FY17.

As a result, PATMI fell 28.1% YoY to S$29.5m.

KSH has proposed a final cash dividend of 1.20 S cents per share, bringing the total dividends declared for FY18 to 2.20 S cents per share.



Construction: Light at the end of the tunnel?

After a 56% decline in construction revenue from FY14 to FY18, we see brighter prospects ahead for the group, especially relative to FY18’s low base.

KSH

Share price: 
66 c

Target:
98 c

"The group’s construction order book currently stands at ~S$542m, one of the highest it has been as at the end of a quarter since 1Q14."

-- OCBC report

The group’s construction order book currently stands at ~S$542m, one of the highest it has been as at the end of a quarter since 1Q14.

Given the slew of en bloc redevelopments in the pipeline as well as a healthy stream of public sector projects, we believe the segment will turn a corner in FY19.


Pty Dev: Launching four SG residential projects in 2018
We believe that KSHH stands to benefit from the residential property rebound through its property development projects with associates and JVs.

As at 31 Mar 2018, ~96.5% of the units already launched by KSHH’s associates and JVs have been sold. There is ~S$85.9m of the group’s attributable share of progress billings to be recognized as sales revenue from these projects (Exhibit 6), and these will progressively contribute to the Group’s results after FY18.

Cash flow statement
Year Ended 31 Mar (S$m)

 

FY17

FY18

FY19F

FY20F

PBT

47.0

34. 7

49.2

51.8

Cash flow from operations

8.9

8.5

79.2

38.3

Cash flow from investing

30.2

-112.9

0.0

0.0

Cash flow from financing

-91.3

27.5

-17.6

-16.3

Ending balance

145.9

76.2

137.8

159.8

In addition, the group plans to launch four Singapore residential projects with its JV and associate partners in 2018.

We estimate that the group’s effective share in these projects translates into an aggregate of ~800 additional units.

We expect margins for these projects to be healthy, and project a stronger share of results from JVs/associates going forward.

After adjustments, our fair value increases from S$0.79 to S$0.98. Against 1 May’s close of S$0.635, we upgrade KSHH from Hold to BUY.


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