SINGAPORE (Jan 7): RHB Research is maintaining Yongnam at “add” saying steel fabrication and engineering specialist could achieve a profit turnaround in FY19F given a slew of major orders secured last year.
Except for one contract for the North-South Corridor (NSC) project, Singapore’s Land Transport Authority had already awarded the remaining 10 contracts with six given out last month to various firms.
“We believe Yongnam could still win strutting works as a subcontractor for these NSC sections, which could fuel further profit growth in FY19-20F,” says RHB lead analyst Colin Tan in a Monday report.
Yongnam ended 2018 with contracts worth $73.4 million secured. This included the Melbourne contract worth $47 million involving strutting works for an infrastructural development.
With total contract wins of $338 million secured in FY18F, the orderbook could be back to healthy level of near $400 million as at end FY18F, up from a multi-year low of $152 million as at end FY17.
Currently, Yongnam is pursuing $1.3 billion worth of infrastructure and commercial projects in Singapore and internationally.
Management believes it has a good chance of winning at least $60 million worth of strutting works in Hong Kong in FY19F.
On home turf, major strut contracts up for grabs this year include works for Changi Airport Terminal 5. Over the next few years, projects in the pipeline include Jurong Regional Line and Cross Island Line.
Notwithstanding Yongnam’s orderbook recovery from a multi-year low, order wins in 2018 still fell short of RHB’s earlier forecasts.
“We thus revise our FY19-20F EPS forecasts lower by 16-73%. Our TP is consequently lowered to 41 cents, pegged to 0.8x FY19F P/BV or 10% discount to its long-term average of 0.9x,” says Tan.
As at 1.30pm, shares in Yongnam are trading flat at 18 cents.
