Earnings per share comes in at S$0.1533, up from S$0.1404 in the year-ago period

 

[SINGAPORE] Steel solutions provider BRC Asia : BEC 0% reported on Tuesday (May 13) a 9 per cent year-on-year increase in net profit for the first half of the year to S$42.1 million, from S$38.5 million in the year-ago period.

 

Revenue fell 6 per cent to S$715.6 million from S$758.3 million in the year before. 

 

&ldquo While the construction sector continues to recover on the back of sustained public and private sector activities, short-term headwinds persist due to lower-than-expected project offtake volumes arising from construction challenges and bottlenecks such as engineering services,&rdquo said BRC Asia. 

 

The decline in revenue comes amid a broad-based softness in steel prices, but delivery tonnage remains stable, reflecting continued demand and the group&rsquo s ability to maintain its market share amid volatility, the mainboard-listed company added.

 

On a per-share basis, earnings rose to S$0.1533, from S$0.1404 in H1 FY2024.

 

The board is proposing an interim dividend of S$0.06, unchanged from a year earlier. 

 

Looking ahead, the group said that Singapore&rsquo s construction industry remains resilient and stable despite a subdued economic outlook amid rising global geopolitical tensions. 

 

The medium-term demand for construction is forecasted to average between S$39 billion and S$46 billion annually, according to the Building and Construction Authority (BCA).

Acquisition aligns with BRC&rsquo s strategy to tap regional markets

 

[SINGAPORE] Steel fabricator BRC Asia : BEC -1.3% said on Tuesday (Apr 22) it has entered into a conditional share purchase agreement to buy a controlling stake of 55 per cent in Southern Steel Mesh.

 

BRC Asia will buy 12.9 million shares from the company&rsquo s parent Southern Steel, for a cash consideration of RM61 million (S$18.2 million). The parent will retain a minority stake.

 

In late February, Singapore-listed BRC Asia said it entered a non-binding term sheet where it had contemplated buying existing and new shares in Southern Steel Mesh. BRC Asia said then that the acquisition aligns with its strategy to tap regional markets and diversify revenue streams, with the opportunity to leverage Southern Steel&rsquo s &ldquo established market presence in Malaysia&rdquo .

 

Focused on the production and sales of steel wire mesh, concrete wires and other related products, Southern Steel Mesh owns four manufacturing plants in the central and northern regions of Malaysia. As at Sep 30, 2024, its book value was RM106.5 million.

 

A steel mill group headquartered in Malaysia, Southern Steel is listed on the main board of the country&rsquo s stock exchange.

 

BRC said the agreement will automatically terminate if the conditions of sale were not fulfilled or waived by Jul 31. These include the passing of an ordinary resolution by Southern Steel&rsquo s shareholders on the proposed acquisition.

This is despite revenue falling 12.4% year on year to S$349.8 million, from S$399.2 million

STEEL fabricator BRC Asia : BEC +1.06% on Thursday (Feb 6) announced its profit after tax rose 13.9 per cent to S$19.5 million for the quarter ended Dec 31, 2024, compared to S$17.1 million in the corresponding year-ago period.

 

This is despite revenue falling 12.4 per cent year on year to S$349.8 million, from S$399.2 million.

 

Gross profit for the three months was S$28.7 million, sliding 19 per cent from S$35.4 million in Q1 FY2024.

 

As at Dec 31, 2024, BRC Asia&rsquo s cash and cash equivalents stood at S$171.7 million, compared to S$180.7 million in the year-ago period.

 

The group said that its sales order book stood at around S$1.5 billion as at end-2024. The duration of the projects in its order book is up to five years and may be subject to changes, it added.

 

For its outlook, BRC Asia said: &ldquo The strong forecasts for construction demand in Singapore bode well for the local reinforcing steel industry in the short to medium term.&rdquo

This is even as revenue fell 21 per cent to S$723.1 million

 

STEEL solutions provider BRC Asia : BEC +0.84% posted an 11 per cent rise in net profit to S$55 million for its second half ended Sep 30, 2024, from S$49.5 million in the same period a year earlier.

 

Earnings per share stood at 20.05 Singapore cents for the half-year period, up from 18.05 cents the previous year.

 

Revenue for H2 fell 21 per cent to S$723.1 million from S$909.9 million. This was mainly due to softening demand in the international trading business, coupled with lower steel prices for both the international trading business and domestic construction industry, said the company.

 

But other income rose 88 per cent to S$20.3 million, from S$10.8 million, due to the disposal of the group&rsquo s interest in Pristine Islands Investment, an investment holding company with a 100 per cent interest in a subsidiary that operates and manages an airport, hotel and resort in the Maldives.

 

The group disposed the investment in H2 2024 and recorded a net gain of S$16.5 million.

 

For the full year ended Sep 30, 2024, net profit grew 23 per cent to S$93.5 million, while revenue fell 9 per cent to S$1.5 billion.

 

The dividends proposed in H2 FY2024 bring the total dividend for FY2024 to 20 cents per share. The books closure date and payment date will be announced later.

 

As at Sep 30, 2024, the group&rsquo s sales order book stood at S$1.4 billion, though it cautioned that the &ldquo duration of projects in our sales order book range up to five years and may be subject to further changes&rdquo .

 

BRC Asia expects a steady pipeline of projects to be launched and awarded, particularly from the public sector. Yet project off-take from ongoing projects remain &ldquo generally disappointing&rdquo over the last year.

UOB Kay Hian (UOB) analysts Llelleythan Tan and Heidi Mo have downgraded BRC Asia BEC (BRC) to &ldquo hold&rdquo from &ldquo buy&rdquo as they see the stock as being &ldquo fully valued&rdquo at its current share price. As at Tan and Mo&rsquo s report on Sept 10, BRC Asia was trading at $2.29.

 

Referring to BRC&rsquo s results for 3QFY2024 and 9MFY2024 ended June 30, the analysts note that the 3Q yielded a &ldquo soft&rdquo set of results that dragged its performance for the nine-month period.

 

BRC&rsquo s financial performance fell short of Tan and Mo&rsquo s expectations. Its 9MFY2024 revenue of $1.14 billion and core net profit of $56.1 million came in at 65.8% and 63.3% of their full-year estimates respectively. BRC&rsquo s 9MFY2024 revenue fell by 3.1% y-o-y while its core net profit, which excluded a $16.5 million gain from the disposal of its Maldives associate, rose by 15.0% y-o-y.

 

The weaker performance can be largely attributed to a soft 3QFY2024 with revenue and core net profit declining 17% y-o-y to $381.7 million and 22% y-o-y to $17.6 million, respectively. The analysts recognise that this was &ldquo primarily due to slower project execution and deliveries, as delays across both the private and public sectors came on a shortage of engineering resources and delays in inspection processes.&rdquo While 3QFY2024 revenue increased by 6.3% q-o-q, core net profit fell 17.6% q-o-q as the firm made a product-mix change towards lower-margin products, they note.

 

Looking ahead, UOB notes that the &ldquo short-term outlook shows promising signs of recovery&rdquo , and in early 4QFY2024, BRC say positive signs of operational improvements evidenced by a steady improvement in labour shortages. This has ensured that projects continue to gain traction resulting in improved project offtake rates. According to the Ministry of Trade and Industry (MTI), Singapore&rsquo s construction sector is poised to see a 4.3% y-o-y expansion. BRC is capable of taking advantage of this growth in the construction sector given their expertise in crucial infrastructure segments. UOB reckons that BRC&rsquo s long-term outlook is positive, supported by a solid overbook valued at $1.32 billion at the end of 3QFY2024. Alongside an accumulation of delayed projects and a dynamic pipeline, UOB expects &ldquo stronger earnings growths moving into 4QFY2024.&rdquo

 

With lower volumes and changes in BRC&rsquo s margin estimates, Tan and Mo have lowered their core earning estimates by 11% to 16% for FY2024 to FY2026. The analysts&rsquo new core patmi for FY2024 has been lowered to $78.9 million from $88.7 million before. Their new core patmi estimates for FY2025 and FY2026 have been lowered to $83.7 million and $86.2 million respectively from $98.5 million and $102.2 million previously.

 

The analysts have also lowered their target price to $2.29 from $2.42 previously. The new target price is based on the same P/E multiple of 7.5 times for FY2025, pegged to BRC&rsquo s long-term average mean.

 

CGS International (CGSI) analysts Lock Mun Yee and Lim Siew Khee have highlighted BRC Asia BEC 0.00% , Hong Leong Asia H22 0.00% (HLA) and Pan-United Corp P52 0.00% as potential beneficiaries from the plans laid out by Prime Minister Lawrence Wong in his first National Day Rally speech on Aug 18. 

 

The construction sector is a potential beneficiary, say Lock and Lim in an Aug 19 note on the Singapore market. &ldquo The raft of infrastructure and public housing projects planned reinforces our view of continued strength in Singapore&rsquo s construction activity over the next five years, which could benefit all three building material companies under our coverage.&rdquo

 

BRC Asia and Pan-United are both pure-play construction players in Singapore, say Lock and Lim, while they view HLA as an &ldquo underappreciated proxy&rdquo for the Singapore and Malaysia construction industry upcycle, given that its current share price implies 2.5 times price-to-earnings (P/E) for its building materials unit. The CGSI analysts also see &ldquo strong earnings growth&rdquo for HLA over FY2024-2025. 

 

Lock and Lim have &ldquo add&rdquo calls on all three Singapore-listed firms, with target prices of $2.40 for BRC Asia, $1 for HLA and 72 cents for Pan-United. 

 

BRC Asia is CGSI&rsquo s top pick in the construction sector, given its &ldquo attractive&rdquo dividend yield of 8% so far this financial year. &ldquo We believe the group&rsquo s high dividend payout of 60% is sustainable over FY2024-2026 amid healthy industry fundamentals and its balance sheet strength.&rdquo

 

Meanwhile, Lock and Lim like Pan-United for its &ldquo healthy&rdquo FY2024-2025 earnings growth, with 6% dividend yield and an &ldquo undemanding&rdquo valuation of 3.7 times 2025 enterprise multiple over ebitda (EV/ebitda), at 1 standard deviation below its historical average. 

 

Renewing social compact

 

In his maiden National Day Rally speech, Wong touched on policies relating to families, jobs, housing and education to renew the social compact, foster greater inclusivity and create a united Singapore.

 

On housing, the HDB built-to-order (BTO) priority access scheme will be extended from mid-2025 to singles buying flats near their parents. 

 

There will also be an increase in housing grants under the Enhanced CPF Housing Grant to support lower-income families. 

 

The ministry is on track to launch 100,000 BTO flats from 2021 to 2025, said Wong, and the waiting time for BTO flats will be shortened to under three years over time, from four years currently, by building ahead of demand. 

 

Wong also unveiled the Kallang Alive masterplan, including a new 18,000-seat indoor arena, will be built to host top-tier events. National training centres and Singapore Sports School will be sited together at Kallang. 

 

A 120km waterfront coastline will be built, with new precincts established, such as Nicoll, Kampong Bugis, Tanjong Rhu as well as Marina South and Marina East. New HDB housing will also be built at Tanjong Rhu. 

 

Elsewhere, mandatory paternity leave for fathers has been increased to four weeks, with parents receiving additional 10 weeks of shared paid parenting leave from April 1, 2025.

 

This will be implemented progressively starting with six weeks for babies born from April 1, 2025, and the full 10 weeks to be implemented a year later. 

 

There will also be support for larger families, such as those having a third child or those with three or more young children, with details to be introduced in Budget 2025. 

 

The additional 10 weeks will be paid by the government. 

 

Meanwhile, a new SkillsFuture Jobseeker Support Scheme will provide temporary financial assistance of up to $6,000 over six months. Workers will have to go for training, career coaching and job-matching services. 

 

A new training allowance under the SkillsFuture Level-Up programme, previously announced in Budget 2024 for full-time courses, will be extended to part-time courses. 

 

The Gifted Education Programme (GEP) will be discontinued and replaced with a new approach to stretch students in their areas of strength and interest.

 

CGS International analysts Ong Khang Chuen and Kenneth Tan are keeping their &ldquo add&rdquo call on steel supplier BRC Asia at a lowered target price of $2.40 from $2.50 previously after the company reported a profit after tax of 51.0% higher y-oy to $34.1 million for the 3QFY2024 ended June 30.

 

Chuen and Tan note that aside from the $16.5 million gain from the disposal of its associate, BRC&rsquo s 3QFY2024 core net profit of $17.6 million was 22% lower y-o-y.

 

The group&rsquo s 9MFY2024 core net profit formed 68% of the analysts&rsquo and 66% of Bloomberg&rsquo s full-year forecasts, to which they note is &ldquo slightly below expectations&rdquo as the pair had expected &ldquo more seasonal strength&rdquo in the 2HFY2024.

 

They write in their Aug 7 report: &ldquo We attribute the earnings miss in 3QFY2024 mainly to lower-than-expected sales volume and a product mix shift towards lower-margin products during the quarter.&rdquo

 

Meanwhile, a report from the Building and Construction Authority (BCA) notes that the demand for steel bars in Singapore for the months of April and May combined rose 24% y-o-y, driven by a strong industry order book and higher level of construction activities.

 

In the 2Q2024, the same report points to industry construction output growing by 6% y-o-y, while the Ministry of Trade and Industry estimated that Singapore construction sector&rsquo s gross domestic product (GDP) contribution grew 4.3% y-o-y. 

 

&ldquo We expect a steady pipeline of projects to be launched and awarded in the coming five years,&rdquo write Chuen and Tan.

 

&ldquo With construction projects likely to skew more towards infrastructure (which uses more lower-margin cut-and-bend products) in the coming years given slowing private investments, we cut our FY2024 to FY2026 earnings per share (EPS) by 6.2% to 7.6% on mix changes.&rdquo

 

Overall, Chuen and Tan believe BRC &ldquo remains on track&rdquo to pay out 18 cents in total dividends in FY2024, due to stronger profitability and a further reduction in net gearing to 15% in end-June from 49% in end-June FY2023, which translates into 8.3% dividend yield.

 

Re-rating catalysts noted by the analysts include a strong improvement in offtake volumes, earnings-accretive merger and acquisitions (M& As), while downside risks include counter-party credit risks and an economic slowdown, negatively impacting construction demand.

 

BRC Asia has posted profit after tax of $34.1 million, up 51.0% y-o-y, for 3QFY2024 ended June 30. This is inclusive of a gain on disposal of an associate of $16.5 million, announced on June 7. 

 

Revenue for the quarter fell 17.0% y-o-y to $381.7 million, announced the steel maker on Aug 6. 

 

Total assets fell 5.8% y-o-y to $866.91 million as at June 30, while total liabilities fell 20.8% y-o-y to $414.1 million. 

 

Net assets as at June 30 rose 14.0% y-o-y to $452.82 million. 

 

Cash and cash equivalents were largely flat, falling 2.3% y-o-y to $160.2 million as at June 30, while net loans and borrowings fell 65.9% y-o-y to $66.9 million. 

 

BRC&rsquo s sales order book continued to remain robust, says CEO Seah Kiin Peng, standing at $1.32 billion as at June 30. &ldquo The duration of projects in our sales order book range up to five years and may be subject to further changes.&rdquo

 

Seah adds: &ldquo Going forward, although we continue to expect a steady pipeline of projects to be launched and awarded, particularly from the public sector, project offtake from ongoing projects remained generally disappointing over the last six months.&rdquo

 

UOB Kay Hian (UOBKH) analysts Llelleythan Tan and Heidi Mo are keeping their &ldquo buy&rdquo call and target price of $2.42 unchanged on steel supplier BRC Asia BEC 0.00% , after the company reported a robust set of earnings for the 1HFY2024 ended March.

 

For the period, BRC saw a 47.0% y-o-y growth to $38.5 million in its earnings and a 5.8% y-o-y improvement in revenue to $758.3 million, driven by increased contributions from the higher-margin steel fabrication segment and lower raw material costs. 

 

The results formed 43.4% and 43.8% respectively of Tan and Mo&rsquo s full-year estimates, in-line with their expectations, especially considering that the period is &ldquo historically a seasonally weaker half.&rdquo

 

The analysts write in their June 12 note: &ldquo 1HFY2024 revenue was driven by higher construction demand while margins expanded on the back of increased contributions from the higher-margin steel fabrication segment coupled with lower raw material costs. As a result, 1HFY2024 gross and net margins rose 2.4 percentage points (ppts) y-o-y and 1.4 ppts y-o-y respectively.&rdquo

 

Tan and Mo add: &ldquo We expect further margin expansion from lower steel prices and a robust orderbook.&rdquo

 

In the 2QFY2024, BRC&rsquo s revenue was softer 4.4% y-o-y and 10.0% q-o-q, which the analysts attribute to lower contributions from the company&rsquo s lower-margin international trading segment.

 

On the other hand, gross profit in the quarter surged 33.9% y-o-y and 10.7% q-o-q, as did net profit, with a 45.7% y-o-y and 24.7% q-o-q growth, thanks to increased deliveries.

 

For the 1HFY2024, BRC   declared an interim dividend of 6.0 cents per share, translating to a dividend payout ratio of 43%. 

 

&ldquo As a recap, the group does not have a formal dividend policy but we opine that the group would be able to sustain its historical average payout ratio of 60% in FY2024, backed by its strong operating cash flows. Based on our estimates, this implies an attractive FY2024 dividend yield of around 8.7%,&rdquo note Tan and Mo.

 

In the medium term, the analysts see a favourable outlook for BRC as strong demand from an expected large number of housing and development board (HDB) projects in Singapore are being planned and upcoming infrastructure projects such as the Changi Airport Terminal 5 and Integrated Resort expansion look to help support delivery volumes. 

 

Although Singapore&rsquo s construction sector grew slower at 4.3% y-o-y in 1QFY2024 due to near-term challenges such as a market shortage of consulting engineering and architectural services, Tan and Mo note that the Building and Construction Authority has maintained a continued strong 2024 total construction demand of $32 billion to $38 billion, driven by ongoing economic growth. 

 

The analysts expect BRC to deliver half of its robust as at end-2QFY2024 $1.3 billion orderbook in the next three to four quarters as volumes recover.

 

They write: &ldquo BRC remains a strong proxy to Singapore' s construction sector, given its commanding market share domestically.&rdquo

 

&ldquo In our view, BRC' s attractive 8.7% dividend yield and growing earnings would help support share pricesees   performance moving forward,&rdquo concludes Tan and Mo.

 

Share price catalysts noted by the pair include the faster-than-expected recovery in construction activities, a complete relaxation of foreign labour restrictions and more public housing projects awarded to BRC.

 

BRC Asia' s revenue for 1HFY2024 was up just 6% y-o-y to $758.2 million but with higher margins, the company' s earnings increased by 47% y-o-y to $38.5 million.

 

The steel supplier plans to pay an interim dividend of 6 cents, representing a 43% payout ratio.

 

As at March 31, its order book has reached $1.3 billion, in line with a healthy level of construction activity.

 

" BRC' s growth trend aligns with the recovery path of Singapore' s economy and the local construction sector, as evidenced by its swift resurgence from the 2023 headwinds and achieving a substantial net profit of S$38.5 million in 1H FY2024," says CEO Seah Kiin Peng.

 

" We are greatly encouraged by the rising construction demand in both public and private sectors, which is anticipated to further strengthen our order book, thereby enhancing our

revenue visibility and fuelling our growth."

Group on Tuesday inked conditional sales and purchase agreement with Daehan Steel and LTC Corp

 

BRC Asia : BEC 0% said on Tuesday (Apr 23) it has agreed to buy 19.9 per cent of Angkasa Daehan Steel, a steel reinforcement company, for S$16.1 million.

 

BRC entered into a conditional sales and purchase agreement with Daehan Steel and LTC Corp on Tuesday. Under the agreement, BRC will acquire 4.6 million ordinary shares of Angkasa Daehan Steel from LTC, and Daehan Steel will acquire 6.9 million ordinary shares from LTC.

 

Daehan Steel will hold 80.1 per cent of Angkasa Daehan Steel after the transaction.

 

The net tangible asset value of Angkasa Daehan Steel was S$80.7 million as at Dec 31, 2023. BRC did not commission a valuation for the deal.

 

The purchase amount is subject to adjustments in accordance with the terms of the agreement, BRC said.

 

The group said the acquisition is a strategic opportunity to take a financial interest in a company that operates in a sector familiar to BRC, and with growth potential.