Yongnam | Buy (Initiate)
Target price: $0.53
Broker: CIMB, Jan 4
Yongnam is our top pick in the construction sector. Other players of sizeable market cap highlighted are Wee Hur, Pan-United, Lum Chang and Koh Brothers.
The Building and Construction Authority projects the value of public sector construction in Singapore to amount to between $18 billion and $23billion per annum in 2018-2021, of which 50 per cent is expected to comprise civil engineering projects.
We estimate this translates into at least $9 billion worth of civil engineering contracts, exceeding the value awarded last year.
Yongnam is our top pick in Singapore's construction sector, with several near-term catalysts from potential major order wins as the bulk of tender packages.
CIMB believes that as Yongnam owns the biggest strutting asset base in Singapore and its strong track record, it could clinch at least half of the strut works for the North-South Corridor project. This would boost the overall utilisation of Yongnam's struts and order book significantly .
Pan-United is Singapore's largest supplier of ready mixed concrete and cement, with over 40 per cent share of both markets in FY16, according to management.
Wee Hur Holdings
Wee Hur's core businesses are construction, property development and dormitory operations in Singapore. Its construction order book stood at $304 million as at end-Sept 2017, comprising mainly residential and industrial projects.
Lum Chang Holdings
Lum Chang is an established main contractor firm with a construction order book of $542.6 million at end-Sept 2017, comprising residential, commercial and civil infrastructure works.
Koh Brothers is an established contractor, developer and civil engineering specialist, with a legacy in drainage management and water resource engineering. As at end-Sept 2017, its construction order book stood at $844 million, boosted by securing two landmark projects last year - Circle Line 6 and the Deep Tunnel Sewerage System Phase 2.