SINGAPORE (Nov 5): CGS-CIMB Research is keeping its “add” call on Yongnam Holdings with an unchanged target price of 45 cents following a series of contract wins for the structural steel contractor and specialist civil engineering solutions provider.
“We anticipate a profit turnaround in FY19F as Yongnam recovers from a multi-year low of projects-on-hand,” says lead analyst Colin Tan in a report on Nov 2.
Yongnam on Nov 1 announced it has secured four contracts in Singapore worth $53.4 million. Scheduled to be completed between 2Q19 and 1Q20, the contracts are expected to have a positive impact on the group’s financial performance for the year ending Dec 31, 2018.
“Based on its last known order book of $273 million as at end-Jun 18, along with earlier order wins of $23 million in July, these contract wins could bring up backlog to close to $350 million,” Tan says.
The first contract will see Yongnam undertake the design and build of a four-storey regional headquarters and a two-storey production facility in the Tampines Wafer Fab Park at Tampines Industrial Crescent. The main contract works will include full design consultancy as well as civil and structural, architectural, and mechanical and electrical works.
In the second contract, Yongnam will supply, fabricate, deliver and erect structural steel composite columns for the development of a 51-storey integrated development located in the Central Business District.
The other two projects, both based in Woodlands, involve the supply, fabrication, delivery and erection of structural steelwork. These are for a nine-storey light industrial and commercial building as well as a seven-storey Health Campus comprising a community hospital, outpatient clinics and nursing homes.
“Other upside catalysts [for Yongnam] could come from taking on major infrastructure works, such as for the North-South Corridor (NSC), which is expected to release two more tender outcomes by this year-end,” says Tan.
CGS-CIMB’s target price for Yongnam is pegged to 0.8 times FY19F price-to-book value (P/BV) – a 10% discount to its long-term average of 0.9 times. It represents an upside of close to 140% from Yongnam’s current trading price.
As at 12.02pm, shares in Yongnam are trading 0.2 cent higher at 18.8 cents, or up 1.1%.
