Rebuilding Foundation

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Company Profile

The company was founded in 1973 and incorporated in 1998 as Hiwela Trading Pte Ltd. Name was changed to Lian Beng Group Pte Ltd post acquisition by Lian Beng directors. The firm was listed in 1999 on 15 April 1999 at an IPO price of $0.146. 

The group business consist of building construction, civil engineering, leasing of construction machinery & equipment and dormitory. It is registered as a G8 contractor with BCA which enable the firm to tender for public sector projects of unlimited value.

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Financial (Fiscal Year in May)

Construction revenue peaked in FY14 and FY15. FY14 revenue mix consist Construction $425M, Ready-mixed concrete $111M and Property Development $199M. FY15 revenue mix consist of Construction $629M, RM concrete $93M with Dormitory emerging as a new business. 

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The particularly strong net profit between FY13-15 were mainly due to fair value gain in investment properties (FY13-14) and dormitory in FY15.

 

Despite weakening order-book, FY16 strong results were supported by associates & joint ventures for property development and investment holding. These were for projects in NEWest, KAP Residences, Midtown Residences, strata sales of office units in Prudential Tower and one-off profit recognition from Eco-tech@Sunview industrial project.

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Order-book started to improve from 1H18 but weak gross margin led to declining net profit & margin.

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Dormitory remain the company most stable income earner ranging between $16M to $20M from FY16 to FY19. The poor earning of $8M in FY20 was due to the impact of COVID-19.

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Risk Profile

Debt surpassed $100M in FY08 and stand at $608M as of 1HNov20.

Z-Score of 1.1 signal that her risk profile is elevated. Current ratio is 1.3.

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Moving Forward

While construction order-book is high, rising material, labour & compliance cost coupled with occasional disruption due to COVID-19   is likely to weigh on margin.

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Likewise, lower occupancy for dormitory would also lead to weaker earning.

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Property development which is undertaken by SLB Development. Since September 2019, it has diversified into fund management in U.K. through Pinnacle Investment Management and in Singapore through Weave Co-Living via a 33% owned associates.Risk assessment is harder as a result.

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Investment in commercial, industrial and residential space appear steady. FY21 results will shed further light on the impact from COVID-19

 

Opinion

Business in the near term could remain challenging. Earning recovery is likely to be slow due to cost inflation and potential higher interest rate environment. 

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Note

On 14-Jun-2021, Lian Beng was required to extend a mandatory offer on acquisition of additional 1.2% shares totalling 44.8%. Cash offer was $0.50 per share. The company intend to remain listed in SGX.