LEY CHOON: 8 years on, fulfills its debt repayment. It can't wait to reward shareholders too

LeyC TohChooHuat1.14 Executive Chairman & CEO of Ley Choon Group, Mr Toh Choo Huat: "With the completion of our debt restructuring agreement in March 2024, we now have greater flexibility over our capital management to grow the business further. We have also taken the opportunity to reward our shareholders with our first dividend payout since 2014.”

profit FY24 Ley Choon Group -- which provides services related to underground utility infrastructure and road works -- was like a top athlete in FY2024 (ended March 2024).

It seemed to have summoned every last bit of energy for one final, blistering sprint to the finish line.

Thus, it powered through FY2024 with higher profit -- and, more importantly -- exceptional cashflow performance (see charts below).

With that, it crossed the finishing line -- that is, it cleared the last parcel of its debt.

And what a sizeable last payment it was: $19.858 million.

debt settled2024

What a long run it has been, starting back in 2016 when Ley Choon entered into a debt restructuring agreement with its creditors.

The deal, which included selling off its non-core assets, was for Ley Choon to finish paying by 31 March 2021.

In 2021, in the midst of the Covid pandemic, Ley Choon successfully got its repayment deadline extended by 3 years.

As it approached that new deadline, it confidently responded to a shareholder question submitted for the 2023 AGM:

"We are in the final leg of our debt restructuring agreement with our lenders. After the bullet repayment is made in the financial year ending 31 March 2024, we may be afforded more financial flexibility to grow the Company and barring any unforeseen circumstances, reward our Shareholders who have been loyal to us."

Thus, with the release of its FY2024 results this week, Ley Choon lost no time to reward shareholders: It announced a dividend of 0.27 cent/share.

The implied yield is 4.6% based on a share price of 5.9 cents.

It's its very first dividend declaration since 2014.

Talking about share price ... following the company's announcement on 14 March 2024 that it had paid up its last outstanding debt, investors have bought up the stock.

It's gone up 50+% from 3.9 cents to 6 cents recently, giving the company a market cap of about S$90 million.

chart5.24

Details of the FY2024 results can be obtained in the company's announcement. Here are takeaways:

• Financial Performance

Ley Choon reported a net profit of S$10.9 million for FY2024, an 18.1% year-on-year increase.

Revenue rose by 4.2% to S$129.1 million. This increase was primarily driven by higher construction activities in road works and cable laying projects. It was partially offset by lower revenue from airport and pipe laying projects nearing completion.

• Order Book and Future Prospects

As of March 31, 2024, Ley Choon Group's unfulfilled order book stood at S$258.5 million. This is expected to be recognized over the next 24 to 36 months.

The prospects for a higher orderbook are good. Underground, Singapore has a complex and extensive network of water pipes, high-pressure gas pipes, high-voltage power cables, fibre optic cables, sewer lines, etc.

Ley Choon Group is signaling that there is a large amount of work coming up to renew such underground utilities.

Mr Toh Choo Huat, Executive Chairman and CEO of Ley Choon, said: “The underground utility infrastructure sector in Singapore remains favourable over the mid-term on the back of an ongoing replacement cycle at scale. As one of the key players in the industry, we are optimistic about replenishing and expanding our order book in the coming year."

At approximately 8X historical earnings, Ley Choon stock is no longer going for a song (as it was, say, six months ag) but will re-rate further if the company clinches contracts that significantly balloons its orderbook.

LEY CHOON: 8 years on, fulfills its debt repayment. It can't wait to reward shareholders too

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