SINGAPORE (Apr 10): CIMB Research believes property developer and construction group Tiong Seng Holdings could see improving profitability from its construction business on the back of its early adoption of prefab technology.
“The company had started building its own prefabricated prefinished volumetric construction (PPVC) capabilities in 2014 and reported significant cost savings in FY17 in terms of labour and faster time to project completion with PPVC adoption,” says analyst Colin Tan in an unrated report on Monday.
Tiong Seng saw its earnings double to $30.9 million for the FY17 ended December from $15.3 million in FY16.
This was partly attributable to improving gross profit margins for the construction segment, which increased 1.9 percentage points to 10.4% for FY17.
See: Tiong Seng's FY17 earnings double to $30.9 mil on higher construction margins
The group also has a property development arm in China, which it is believed to be scaling back on.
“Citing challenges in the current China property market amid cooling measures, [Tiong Seng] intends to shift some of its capital away from its China property development business back to its Singapore business,” Tan says.
“[Tiong Seng] expects to see an influx of public sector projects (in Singapore) in 2018F, which it intends to bid for.” Tan adds.
As at end December, the group’s order book stood at $543 million, which is expected to keep it busy until 2020.
As at 2.57pm, shares of Tiong Seng are trading flat at 39.5 cents, or an estimated price-to-earnings ratio of 5.8 times and a dividend yield of 3.8% for FY17.
