3QFY14 PATMI up 22% YoY
KSH Holdings reported 3QFY14 PATMI of S$9.9m, up 22% YoY, mostly due to increased contributions from both the construction and property development segments. 9MFY14 PATMI cumulates to S$33.5m, up 50.3%, and makes up 69% of our full year forecast. We judge this to be mostly within expectations, and anticipate a backloaded year in terms of revenue recognition from construction and development projects. In addition, we note that 3QFY14 earnings were also impacted by up-front marketing costs for recent projects launches.
Successful launch at key Beijing project
In Jan-14, the group launched its 45%-owned Beijing condo project (Liang Jing Ming Ju Phase 4) and saw a strong performance. Over 60% of the residential units (comprising a total net sellable area of 31.4k sqm) were sold at average prices of RMB 23.5k psm – higher than the RMB 20k psm previously anticipated. We understand that KSH will now launch the remaining residential units and the retail component progressively, and we expect the project’s contribution to drive continued earnings growth in FY15 as it achieves TOP.
Construction order book healthy at S$460m
The group’s order book currently stands at a healthy S$460m, which translates to 1.6 times total LTM construction revenues. The last two key contracts won by KSH were worth S$42.5m (United World College of South East Asia) in Dec-13 and S$76.9m (KAP Residences) announced yesterday evening.
Maintain BUY with unchanged fair value estimate S$0.73
KSH now holds S$144.6m in cash and equivalents with a low net gearing of 3.4%; we see this strong balance sheet to hold dual key roles: 1) buttressing the group amidst an uncertain residential outlook, and 2) providing dry powder for capital allocation into accretive opportunities. Maintain BUY with an unchanged fair value estimate of S$0.73.
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