SINGAPORE (Nov 21): CGS-CIMB Research is keeping its “add” call on BRC Asia with an unchanged target price of $1.90 after the steel reinforcement solutions provider ended FY2019 with a bang.
BRC saw it full-year earnings more than double to $31.6 million for FY2019 ended September, from $12.0 million a year ago.
The surge came on the back of a 61% jump in FY2019 revenue to $913.3 million, primarily attributable to the full-year consolidation of Lee Metal Group, which was acquired in July last year.
At the same time, an increase in steel trading and distribution activities also contributed to the higher revenue.
FY2019 gross revenue rose 70% to $76.6 million, as gross profit margin improved by 0.5 percentage points to 8.4% on the back of higher volume of value-added sales tonnage delivered and costs synergies from bulk raw material purchases.
As at end-September, the group’s cash and cash equivalents stood at $65.8 million, while its order book stood at $950 million.
In light of the stellar FY2019 results and a rosy outlook, the group has declared a special dividend of 3 cents per share. Together with a final dividend of 5 cents per share, this brings total dividends for FY2019 to 8 cents per share, representing a dividend payout of 59%.
The group had paid a total dividend of 1 cent per share a year ago.
“We continue to like BRC for its market leadership in Singapore’s reinforced steel industry, earnings visibility riding on the recovery in home market demand, and improving balance sheet strength,” says lead analyst Ong Khang Chuen in a Nov 20 report.
Following the acquisition of Lee Metal in 2018, Ong expects BRC’s price leadership and cost synergies to drive further margin expansion in FY2020F. “We forecast BRC’s net profit margin to further expand to 4.1% in FY2020F,” he says.
“We expect the continued rollout of mega infrastructure projects to underpin growth over the next three years,” Ong adds. “We expect BRC to report net profit growth of 21.8% in FY2020F.”
As at 3.51pm, shares in BRC are trading 3 cents lower, or down 2.0%, at $1.50. Year-to-date, the counter has climbed 20% from $1.25 at the start of the year.
According to CGS-CIMB valuations, BRC is trading at an estimated price-to-earnings (P/E) ratio of 9.28 times, a price-to-book value (P/BV) of 1.24 times, and a dividend yield of 3.92% for FY2020F.
