SINGAPORE (June 4): OCBC Investment Research is upgrading KSH Holdings to “buy”, from “hold” previously, and raising its fair value estimate by 19 cents to 98 cents.
This comes despite KSH posting a 28.1% drop in full-year earnings to $29.5 million for the FY18 ended March.
Total FY18 revenue slid 33.4% to $132.6 million, on the back of a decline in project revenue.
See: KSH Holdings posts 28% drop in FY18 earnings to $29.5 mil
However, according to lead analyst Deborah Ong in a report on Monday, KSH could finally see light at the end of the tunnel amid a rebound in the residential property market.
“After a 56% decline in construction revenue from FY14 to FY18, we see brighter prospects ahead for the group, especially relative to FY18’s low base,” says Ong.
She notes that the group’s construction order book currently stands at approximately $542 million – one of the highest it has been as at the end of a quarter since 1Q14.
“Given the slew of en bloc redevelopments in the pipeline as well as a healthy stream of public sector projects, we believe the segment will turn a corner in FY19,” she adds. “We believe that KSH stands to benefit from the residential property rebound through its property development projects with associates and JVs.”
According to Ong, some 96.5% of the units already launched by KSH’s associates and joint ventures have been sold, as at end-March.
“There is approximately $85.9 million of the group’s attributable share of progress billings to be recognized as sales revenue from these projects, and these will progressively contribute to the group’s results after FY18,” she says.
In addition, Ong highlights that KSH plans to launch four Singapore residential projects with its JV and associate partners in 2018. “We expect margins for these projects to be healthy, and project a stronger share of results from JVs/associates going forward,” she adds.
As at 12.51pm, shares of KSH are trading 1.5 cents higher, or up 2.4%, at 65 cents. This implies an estimated price-to-earnings ratio of 8.4 times and a dividend yield of 4.8% for FY19.
