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SAC Capital initiates ‘buy’ on Soilbuild Construction after ‘remarkable recovery’ in 2HFY2023

Felicia Tan
Felicia Tan • 2 min read
SAC Capital initiates ‘buy’ on Soilbuild Construction after ‘remarkable recovery’ in 2HFY2023
Soilbuild reported earnings of $6.0 million for the 2HFY2023, marking a turnaround from the loss of $28.0 million in the corresponding period the year before.
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SAC Capital analysts June Yap and Matthias Chan have initiated “buy” on Soilbuild Construction Group S7P -

with a target price of 4 cents.

The report, dated May 2, highlights Soilbuild’s “remarkable recovery” in the 2HFY2023 ended Dec 31, 2023.

“After a 1HFY2023 turnaround in profitability, the group has reaped the rewards of its labour by quadrupling its net profit for 2HFY2023 h-o-h,” write Yap and Chan.

Soilbuild reported earnings of $6.0 million for the 2HFY2023, marking a turnaround from the loss of $28.0 million in the corresponding period the year before. The group reported full year earnings of $7.3 million, reversing from the previous year’s total loss of $31.7 million.

“Following the turnaround, the group has proposed a dividend of 0.1 cents per share for FY2023 which translates to a dividend yield of 3.1%. This is a dividend payout of 18.2%,” they add.

In addition, the group is poised to benefit from the positive outlook for Singapore’s construction industry. The industry is expected to grow at a compound annual growth rate (CAGR) of 2.7% from 2023 to 2027, say the analysts.

See also: Beansprout initiates ‘buy’ call on KIT with TP of 59 cents

The group’s growing orderbook which Yap and Chan forecast to grow by 5% y-o-y to $652.8 million by the end of FY2024, as well as its digital transformation initiatives to increase productivity and its focus on high specification and high value projects are other growth drivers.

Soilbuild has been in the construction business for over 40 years since its opening in 1976. The group is graded A1 under CW01 (general building) requirements by the Building and Construction Authority (BCA). Soilbuild is also graded A1 under BCA’s CW02 (civil engineering) requirements. This allows the group to tender for all types of buildings with an unlimited contract value, as well as civil engineering projects with a contract value of up to $105 million.

Some of the group’s flagship properties are Solaris at One North and Eightrium @ Changi Business Park, industrial development West Park BizCentral as well as Tuas Connection, a land-based factory.

See also: UOBKH lowers MINT’s TP to $2.93 after its data centre JV’s all-in cost of debt to increase after January expiry

As at Yap and Chan’s report, the group’s share price of 3.2 cents reflects a P/E ratio of 5.5 times, which compares “favourably” to the mean P/E of its peers of 7.4 times.

“Referencing peer P/E gives us a price target of 4 cents, a 26.4% upside from current levels,” the analysts write.

As at 4.49pm, shares in Soilbuild Construction are trading flat at 3.3 cents.

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