SINGAPORE (May 24): Yongnam's JV with Leighton Contractors was awarded a $553.8 million contract to design and construct the North-South Corridor, the 0.64km stretch of a tunnel between Kampong Java Road and Suffolk Walk.
See: Yongnam JV wins $554 mil contract for North-South Corridor project
With the latest order win, analyst Colin Tan of CGS-CIMB Securities estimates that Yongnam's order book now stands at $308 million, above its three-year average of $290 million, based on its 30% stake in the JV. An additional $50 million in strut works on top of the 30% of N103 contract value would bring its order book to $358 million.
The job is slated to start in 2Q18, with initial works in the planning and design stage. “We think significant revenue recognition could flow in from 1Q19F onwards,” says Tan.
Given the N107 package for the North-South Corridor project was awarded to Samsung C&T, CGS-CIMB believes there could be an opportunity for Yongnam to be subcontracted for the strutting works of N107 as well as for the N106 package that Samsung won in Nov 2017. The strut orders for these packages could fetch $50 million each, based on estimates by the research house.
In addition, Yongnam is currently tendering for $1.1 billion of new projects in Singapore and overseas. These include Melbourne Metro strutting project -- which Tan expects Yongnam to win in the near term -- and other civil engineering and strut orders for infrastructure projects in Singapore, Australia, Hong Kong and the Middle East.
At 32 cents, Yongnam is trading at approximately 0.5x CY18F P/BV and 5.9x CY19F P/E, below its long-term average of 0.9x P/BV and 9x forward P/E during the profitable years.
“Maintain “add” and target price of $0.56,” says Tan, based on 0.8x CY19F P/BV or 10% discount to its long-term average.
