Stock.i1: Lian Beng Group Upcoming Earnings Announcement

With Lian Beng Group releasing their 1H FY2021 results in the month of January 2021, we will be reviewing the Group’s FY2020 results highlights and their recent updates.

About Lian Beng Group

Established in 1973, Lian Beng Group Ltd is one of Singapore's major home-grown construction groups with integrated civil engineering and construction support service capabilities.

As a Grade A1 contractor in Building and Construction Authority (BCA) and a A2 grading in Civil Engineering, Lian Beng can tender for public sector building projects of unlimited contract value and engineering projects of up to $85 million in contract value.

Backed by years of experience and an impeccable track record, the Group has established a reputation for managing large-scale and complex construction projects. Apart from construction, Lian Beng also engages in property investment, with investment projects locally and overseas. The Group also operates two local workers’ dormitories, both through joint ventures.

Recent FY2020 Result Highlights

The Group registered an increase of 43.8% jump in revenue from S$386.8 million in FY2019 to S$556.0 million in FY2020 as of 31 May 2020. This increase was mainly due to the progressive revenue recognition of construction projects in the first 10 months of FY2020.

The Group did not record much revenue in April and May due to Circuit Breaker (“CB”) measures implemented by the Singapore government to combat the COVID-19 pandemic.

Alongside, the group recorded a big loss of S$10.9 million from the ‘share of results of associates’, resulting in a drop of Lian Beng’s net profits from 11.9% to S$33.65 million during the same period.

The share of loss of associates was mainly due to the share of fair value loss of investment properties.

Increase in Order Book

On 11 May 2020, Lian Beng secured a contract through tender from NovaSims Development Pte Ltd for the proposed residential flat development, comprising of 5 blocks of 18-storey residential flats and worth approximately S$174 million. The contract period is set at 36 months and has commenced since June 2020.

The contract will have a positive financial impact on the net tangible assets per share and earning per share of the Group for the financial year ending 31 May 2021.

As of 11 May 2020, the Group’s order book stood at approximately S$1.7 billion which provides a sustainable flow of activity through FY2023.

Comparison with Lian Beng’s Peers

Lian Beng’s Price/Nav valuation ratio of 0.29x tops the 2 peers - Wee Hur and Lum Chang whose Price/NAV ratio at 0.45x and 0.56x respectively.

On the flip side, Lian Beng has a lower dividend yield of 2.4% versus that of Wee Hur’s 3.5% and Lum Chang’s 3.4%.

Management Outlook

The management stated during their FY2020 results that the outlook is not optimistic as:

• The Ministry of Trade and Industry Singapore (“MTI”) predicts that Singapore’s GDP growth forecast for 2020 will head downwards to the range of -7.0 to -4.0 per cent.

• The COVID-19 pandemic has severely affected the construction industry. While a controlled restart of some construction activities has since been permitted, the pace of resumption has been slow as a substantial proportion of the foreign construction workforce is still under quarantine. There might also be delays for tenders for major public infrastructure projects in view of the pandemic.

• The group expects to incur additional costs to comply with government measures such as COVID-Safe worksite requirements and regular swab tests.

All in all, the Group remains cautious during this COVID-19 period with its top priority being cash conservation and cost control.

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