SINGAPORE (Oct 2): Lian Beng Group is poised to build on its strong technical expertise to capture opportunities in the construction sector, according to SAC Advisors.
With its capabilities in Prefabricated Prefinished Volumetric Construction (PPVC), the research house believes Lian Beng could stand to benefit from the government’s Construction Industry Transformation Map (CITM).
Lian Beng last year acquired a 60% stake in United Tec Construction, a construction firm with PPVC capabilities and specialises in Design for Manufacturing and Assembly (DfMA) – one of the three areas highlighted under the CITM.
PPVC is a key technology under DfMA, which involves moving traditional construction work offsite into controlled factory environments. This allows for better quality control and higher productivity.
“Since November 2014, using PPVC methods has been a required condition for the sale of selected non-landed residential Government Land Sales sites,” says lead analyst Chow Zheng Jie in a non-rated initiation report on Wednesday. He notes that as of end-2018, a total of 29 sites have been gazetted with PPVC requirements.
According to Chow, the Building and Construction Authority (BCA) forecasts a strong pipeline of projects prescribing such technologies for construction tenders expected to be called between January 2019 and December 2020.
“There is strong demand from the public sector for projects using DfMA technologies,” Chow adds. For example, the Housing and Development Board (HDB) has committed to adopting PPVC for approximately one-third of dwelling units in 2019 and 2020.
The BCA also expects the number of tender for projects using DfMA technologies to increase next year.
Already, Lian Beng has been leveraging its capabilities and track record to secure contracts, Chow says. In the FY2019 ended June, Lian Beng won $556 million in contracts. And in year-to-date FY2020, the company has been awarded two contracts worth over $300 million in total.
As at Sept 13, the group’s order book stood at approximately $1.5 billion. “The group has a demonstrated history of building a robust order book,” says Chow.
According to BCA, up to $32 billion worth of construction contracts is projected to be awarded in 2019. As at end-July, some $19.7 billion worth of contracts have already been awarded.
Over the next four years up to 2023, BCA expects a steady improvement in construction demand, driven by public residential developments.
“Lian Beng’s status as an A1 grade contractor in General Building allows the group to tender for building projects of unlimited contract value, which the group can capitalise on to capture the expected rise in construction demand,” Chow says.
As at 4.14pm, shares in Lian Beng are trading half a cent lower, or down 1.0%, at 50 cents.
