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Stocks In Focus SG (Boustead, CSC Hldgs, Junma Tyre Cord) – 11/11/13
Boustead 1H14 Revenue Up 7.3%
Boustead Singapore reported 1H14 revenue of $242 million, up 7.3 percent as compared to $225.6 million in 1H14. This was mainly attributed to a 40.1 percent increase in contribution from its energy-related engineering services segment. Despite a marginal increase of revenue in 2Q14 on a year-on-year basis, Boustead’s gross profit for the quarter jumped 22.3 percent, which was accompanied with a strengthening in gross profit margin from 28.6 percent to 34.6 percent, as the company was able to negotiate for higher margins on specific projects undertaken by its engineering divisions. The company registered other operating losses of $1.9 million in 2Q14 as a result of foreign exchange and investments related adjustments, compared to a $5.7 million in other operating income last year due to a one-off gain of $9.8 million from the disposal of a subsidiary. Consequently, bottom line fell 41.1 percent to $9 million in 2Q14.
Significance: Despite the good results for the year from securing recording breaking new orders as well as the strategy of enhancing of recurring income and unlocking of value via its leasehold portfolio, Boustead is of the view that its performance in FY14 will not be on par to that of FY13 as intensifying competition weighs on its margins.
CSC Secures RM80m Development Contract in Iskandar
CSC Holdings, via its subsidiary CS Geo (Malaysia), has been awarded a contract worth, RM80 million, to construct the foundations and a two-storey basement for the new development of Bora Residences @ Tropicana Danga Bay in Iskandar, Johor. For the construction of foundations, CSC is required to construct bored piles and diaphragm walls, install king posts for the new development. Work on the project is expected to commence in November 2013, and completed by the first half of 2015. Bora Residences @ Tropicana Danga Bay is the second phase of the larger Tropicana Danga project and when completed, will come with waterfront views, sky decks, residential units and limited edition penthouses. The development is also expected to transform Danga Bay into a waterfront city in Iskandar, Malaysia.
Significance: With this latest contract win, CSC has secured in excess of RM200 million worth of contracts in Malaysia since April 2013, while total contracts awarded to the group since the start of its current financial year on 1 April 2013 has increased to approximately $300 million. CSC’s current order book stands at approximately $250 million with the bulk expected be completed over the next six months.
Junma Tyre To Sell Stake In Steel Unit For Rmb110.8m
Junma Tyre Cord Company has entered into an agreement to dispose its 55 percent stake in Zhangjiagang Junma Steel Tyre Cord Company (STC) to a company related to its chairman for Rmb110.8 million. As a result of adverse industry conditions, STC had sustained losses for FY12 and 9M13. Despite posting a turnover of Rmb614 million in FY12 for its steel segment, STC recorded a gross loss of Rmb43 million as the average selling price of steel tyre cords fell 15.5 percent to Rmb10,030, from Rmb11,863 a year ago. In view of the additional capital expenditure required to surmount a challenge in the steel industry, uncertain global outlook as well as continuously weakened demand from key customers, Junma Tyre believes that a disposal is the best course of action. As at 8 November 2013, Junma Tyre has taken loans, worth Rmb829 million, on behalf of STC.
Significance: Apart from reducing its liabilities, Junma Tyre is expected to record a Rmb45.1 million net profit from the proposed disposal which would help to fund operational working capital.
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