Yongnam Holdings Ltd

today July 27 : 0332 GMT [Dow Jones] Singapore construction plays advancing as investors bet they stand to gain from Singapore housing market pickup; foundation specialist CSC Holdings (C06.SG) +8.6% at S$0.19, building contractor Lian Beng (L03.SG) +5.1% at S$0.31, engineering and construction services firm Yongnam (Y02.SG) +5.6% at S$0.285. \"I think the interest in these construction stocks is due to the improving property market. After the strong pre-sales we\'\'ve seen recently, investors are thinking these condos that people are buying will need to be constructed,\" says analyst at local house. Adds, there had been some concerns on the companies\'\' order books when work on Singapore\'\'s new integrated resorts, slated to open early 2010, completed, but property-market pick up should help keep order books full, provides better earnings visibility. Charts show traded volumes for all 3 stocks trending some way above daily average, suggests buying interest may have momentum, shares could push higher near-term. (KIG)

Posting by Sebastian Chong at his website www.shareowl.com recently: Yongnam can go global more easily than Lum Chang. Yongnam\'s current profit margins are also higher than Lum Chang\'s. Yongnam is also more specialised than Lum Chang. Prospective PEs could be about the same but the price/NTA is lower for Lum Chang. Another consideration is trading liquidity. For Yongnam, daily volume is around 5 million shares but for Lum Chang, it is around 300,000 shares. Yongnam\'s market cap is $281m while Lum Chang\'s market cap is just $86m. Hence Yongnam could be more appealing to institutions.

OUTPERFORM Maintained S$0.25 @07/12/09 Target: S$0.47 Construction Maintain Outperform; target price raised to S$0.47 from S$0.44. YNH had a record order book this year and its FY09 net profit is expected to reach new heights. We keep our Outperform rating as we believe 2010 will be an even better year. We have upgraded our FY10-11 EPS estimates by 7-8% to factor in higher contract-win expectations. Accordingly, our target price rises from S$0.44 to S$0.47, still based on 10x CY11 P/E, at the lower end of its mid-cycle multiples. We expect stock catalysts from the announcement of significant contract wins. Order book can scale new heights. YNH is bidding for more than S$1bn worth of contracts. We highlight five major projects which we believe YNH could win, including Singapore Sports Hub, Downtown Line, Jurong rock cavern and Oman Airport Terminal Building. Based on our estimates, if YNH meets our expectations, its order book at end-2010 could breach the S$600m mark.

Stock is at 24 cents currently, with a PE of 7.3X (based on 24 divided by 3.27 eps). Not exactly cheap/attractive. It has $492 m of orderbook as at Dec 31 last yr. Company said 62% would be recognised as revenue this year = $305 million, which is slightly lower than $347 m of revenue in 2009. No growth? Yongnam has bids for abot $1.3 billion worth of projects that start this year or 2011. Assuming it is successful in some of its bids, the revenue recognition will be in phases. How much will it boost revenue in 2010? On the whole, I am not persuaded that Yongnam is a buy at this level. Anyone has a view on this? Please share....

Hohoho....Dello, The IRs are completed already. So what are the other major contruction projects left in Singapore?? Only the highways and some private condo projects left. As the pie gets smaller, the competition will be more fierce. This explains why a lot of constructon and engineering companies are going for IPO last year and this year. They all IPOing at the peak of their earnings, that\'s why they are willing to accept low PE of 4-6x. This is the same scenario in 1990s when we have a flood of construction companies like Hor Kew, Koh Brothers going IPO. Have they performed? I would rather pick some good companies who have overseas exposure, especially to China. Companies like Midas and Engro who are supplyng buildig materials to the infrastructure sectors in China, will be booming for the next 10 years. These companies are run by Singapore management. So you don\'t have to worry about the corporate governance issue. Suggest you take a look at these companies instead.

Credit Suisse has just upped target price to 40 c from 35 c for Yongnam (now doing 25 c)

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Maintain OUTPERFORM 4Q09 below expectations; growth prospects remain strong EPS: ▲ TP: ▲ Su Tye Chua / Research Analyst / 65 6212 3014 / sutye.chua@credit-suisse.com ● Yongnam reported FY09 results with revenues up 4% YoY and earnings up 18% YoY. The results were below expectations, on lower-than-expected structural steel segment contribution in 4Q09 (-5% QoQ, -37% YoY), and cost overruns/stoppages at the Dubai Metro Rail project, with gross profit down 57% YoY. ● However, S$340 mn of contracts secured during the year boosted Yongnam’s order book to S$492 mn at the end of December 2009, of which 62% would be recognised in FY10. Going forward, we see Yongnam as front-runner for several high-profile infrastructure projects in Singapore, expected to be up for tender in 2010 (Downtown Line Phase 2, Sports Hub). Overseas, Yongnam is eyeing contracts in Hong Kong, Middle East and India. In aggregate, Yongnam could see incremental S$650 mn contract wins in FY10/11 based on our estimates. ● We share management’s optimism on Yongnam’s growth prospects, given its scale, and buoyant construction sector demand and raise FY11 forecasts by 36% on stronger order book assumptions. Our new target price is S$0.40 (was S$0.35), and we maintain our OUTPERFORM rating.