SINGAPORE (March 9): OCBC Investment Research is ceasing coverage on firearms-training facilities provider Starburst Holdings due to lack of market liquidity.
This comes after Starburst saw its net loss widen seven-fold to $11.7 million for the full year ended Dec 31. This was mainly due to delays at its Marina One architectural steel project.
Project and production costs surged 75.9% to $21.2 million, mainly due to higher fabrication and installation costs as well as provision made for foreseeable losses. Consequently, total operating expenses increased 54.1% to $29.1 million for FY16.
“The Marina One project has been an expensive lesson as the project delay, which is beyond Starburst’s control, resulted in almost double digit loss on the entire project,” says OCBC lead analyst Eugene Chua in a Wednesday report.
Chua adds that “it remains uncertain whether Starburst will be compensated for the costs incurred arising from this delay.”
In addition, Starburst is unlikely to receive a boost in projects from the Middle East despite oil prices rebounding from all-time lows.
“We believe project pipeline from the Middle-East remains uncertain,” says Chua. “Any projects made available now will certainly face increased competition after (the dry spell).”
Meanwhile in Singapore, Chua says Starburst’s woes are unlikely to be lifted by the government’s plan to build a $900 million military training facility over the next 10 years.
“We expect any potential projects under Starburst’s scope to be back-end loaded and unlikely to be recognised in the near-term,” Chua explains.
“Given the lack of earnings visibility, we expect Starburst outlook to remain weak and uncertain,” he says.
As at 4.54pm, shares of Starburst are trading half a cent lower at 20.5 cents.
