BBR Holdings (S) Ltd - MANAGEMENT REPLY: Is another profit decline on the way?

17/5/2013–BBR Holdings (S) Ltd expects to remain profitable in 2013, despite rising costs and competition in the construction industry.

The company recently announced earnings for Q1 FY13:

Revenue: -17.1% to S$78.2 mln
Profit: -41.3% to S$2.06 mln
Forex gain: S$161,000 vs S$9,000
Cash flow from operations: (S$4.7 mln)vs (S$1.8 mln)
Dividend: Nil
Order book: S$1.1bln as on May 7, 2013

Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.

Question

1. Is another profit decline on the way?

BBR Holdings' Q1 revenue and profit are sharply lower than last year.

While the revenue was lower because the property development business contributed less, profit was hit by higher 'other operating cost'.

Unfortunately, it seems this wasn't just one bad quarter of poor performance.

Atleast, BBR Holdings' forecast for 2013 suggests it isn't going to get better in a hurry.

The company merely predicts it will stay profitable in 2013.

This is a bit tricky because we're only in Q1, which suggests that there is a possibility of loss-making quarters evened out by profitable ones.

Also, there isn't any indication that the performance will even improve in 2013.

Management Reply The company is unable to comment on this query as it would be deemed as making a forward-looking statement which may be price sensitive in nature.

Question

2. What led to 'higher remuneration expense'?

BBR Holdings' "Other Operating Cost" increased in Q1 due to 'higher remuneration expense'.

We wonder what could have led to such higher remuneration expense.

Was this the higher foreign worker levy?

Or was it the executives who got paid more?

Management Reply Higher remuneration expense was mainly due to increase in headcounts in line with the increase in projects undertaken in 1Q2013.

Question

3. How is the labour crunch impacting operations?

The increased foreign worker levy is designed to make Singapore companies more productive – doing more with the same or fewer workers.

Is this working for BBR?

Management Reply Yes, it will have a small impact but the company has factored in the higher labour costs in their tender prices for new projects and continues to explore and implement measures to improve its operational productivity.

Question

4. How much will it earn on Malaysian book orders?

Just days before Q1 results, BBR Holdings' announced S$116 mln worth of orders to build two bridges in Malaysia.

One of these is to be the 1.48 km Batang Sadong Bridge, the longest bridge in Sarawak.

What profit margins is it likely to book on these?

Management Reply The company is unable to comment due to commercial and confidentiality reasons.

Question

5. When were the deals actuallysecured?

Curiously, their disclosure to the SGX, dated April 22, points out that work on both bridges had started.

This begs the question: when were the deals actually secured?

At S$116 mln, this equates to less than 10% of their order book. So, these contracts might not move the needle on the stock price.

But why was the announcement delayed?

Management Reply The announcement was delayed as the company was still in discussion with the project owner to finalise the contract price due to various variation of works for this project.

Question

6. How will Malaysian election impact prospects for more contracts?

With the General Election out of the way, how is this impacting the pipeline for more deals?

Management Reply There is no impact on the company and it will continue to bid for projects in Malaysia as and when appropriate.

We thank the management for its response.


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