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CGS-CIMB lowers BRC Asia's EPS estimates and TP after bracing for slower offtake

Felicia Tan
Felicia Tan2/15/2023 04:59 PM GMT+08  • 2 min read
CGS-CIMB lowers BRC Asia's EPS estimates and TP after bracing for slower offtake
CGS-CIMB Research has kept its 'add' call while lowering its TP to $2.40 from $2.50 previously. Photo: Albert Chua/The Edge Singapore
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CGS-CIMB Research analysts Ong Khang Chuen and Kenneth Tan have lowered their earnings per share (EPS) estimates for BRC Asia’s BEC %

FY2023 to FY2024 by 3% to 9% after the company is now subjected to eight months of slower construction site activities in FY2023.

The analysts add that they expect the company to see slower offtake with the “Heightened Safety” period being extended by three months.

The Ministry of Manpower (MOM) announced the extension of the period till end-May from end-February previously after a concerning rise of workplace deaths year-to-date (ytd).

“We believe the extension of the heightened safety period will likely result in slower volume offtake, and potentially lead to some margin pressure given more aggressive competition levels to overcome the lower delivery volumes,” they write.

With the EPS cut, the analysts have also lowered their target price to $2.40 from $2.50 previously.

That said, they have kept their “add” call as they see BRC’s valuations as still “attractive” at a calendar year (CY) 2024 P/E of 6x and a dividend yield of 8%.

See also: Brokers' Digest: Mapletree Industrial Trust, IREIT Global, Jumbo Group, Netlink NBN Trust, PropNex

BRC Asia reported profit after tax of $11.7 million for the 1QFY2023 ended Dec 31, 2022.

“We now prefer Hong Leong Asia within the building materials space for its stronger earnings growth potential in CY2023,” they write.

“Re-rating catalysts include better improvements in labour productivity driving an earlier recovery in construction activities. Downside risks include counterparty credit risks and weaker construction demand due to a global slowdown,” add the analysts.

As at 4.58pm, shares in BRC Asia closed 2 cents lower or 1.09% down at $1.82.

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