PhillipCapital’s senior research analyst Terence Chua has started coverage on BRC Asia with a “buy” rating and a target price of $1.87.

In a Feb 22 note, Chua forecasts “record earnings” for FY2021 and FY2022 of $42 million and $45 million respectively on the back of a general recovery in the construction sector. 

He estimates that construction activity has resumed to about 75% of pre-Covid 19 levels at the moment, and expects this to go up to 80% by June 2021 as construction activities continue to resume island-wide.


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Furthermore, construction demand is expected to recover to $23.0 billion to $28.0 billion in 2021 recovering from the $21.3 billion for 2020, and Chua believes that BRC Asia’s leadership position in the reinforced steel industry is best positioned for a construction sector recovery. 

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BRC is now the largest steel reinforcement supplier in Singapore, with a dominating 70% market share.

According to the Building and Construction Authority (BCA), construction demand is expected to recover from 2021 as construction activities resume. This will be supported by public residential developments and various infrastructure projects such as the construction of the Cross Island MRT. 

On a separate note, there is potential for dividend payout to recover from FY2021 and FY2022, says Chua. 

“We think the group could potentially declare dividends of 10 and 11 cents for FY2021 and FY2022 respectively, translating into a dividend yield of 6.3% and 6.9% respectively for FY2021 and FY2022.” he notes. 


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The group’s final dividend for FY2020 fell 60% vs. FY2019 as earnings declined 36% due to headwinds in the construction industry last year. 

Despite this, the group still declared a special dividend of four Singapore cents for FY2020, translating to a payout ratio of about 68% (up from 59% for FY2019). 

Chua concluded by saying that he is positive on the outlook of the construction industry post circuit-breaker. As construction activities resume, demand for construction materials is expected to increase, leading to a re-rating of BRC Asia’s shares.

At 11.23 am, shares of BRC Asia were trading at $1.60, with a FY2021 dividend yield of 3.8% and price to net asset value (P/NAV) ratio of 1.3 times.