NRA Capital Pte Ltd

Written by: Jacky Lee

Tuesday 18 Aug 2015

Libra Group Limited – 1H15 results briefing

Gaining momentum and growing

At a price of S$0.156, Libra Group trades at 0.96x PBR or 4.3x annualized FY15 PER. We consider its valuation undemanding.

Libra Group 1H15 sales improved by 39.8% yoy to S$39m. The increase was attributed by all three segments of Libra Group; Mechanical and Electrical Engineering Services (M&E), Air-conditioning and mechanical ventilation (ACMV) manufacturing and building & Construction solutions. Segmental Revenue of 1H15 contributions breakdown is as follows:

S$m

1H15

1H14

M&E

22.9

19.1

Manufacturing

9.1

8.2

Building and Construction Solutions

7.1

0.6

However, due to weakened property markets. The group was faced with price competition, hence the gross profit margin declined by 6% pts yoy to 20.1% in 1H15. Including higher administrative expenses from the newly acquisition of Cyber Builders and finance expenses, net profit declined by 27.4% yoy to S$2.1m.

As of March 2015, the group has announced its outstanding order book of S$102m, plus it recent contact win of total S$45m, we believe the group back log order should remain strong at approximately S$108m as of end June 2015 (excluding Cyber Builders’ order book, which acquisition is completed on April 2015).

 Key takeaway from analyst results briefing:   

  • Libra Group recently won a contract valued at S$35.5m with Philips Electronics on an ACMV, Fire protection systems and installation of architectural works on a four storey industrial building.
  • 100% acquisition of Cyber Builders Pte Ltd completed on April 2015.
  • Management expects SG&A expenses ratio to improve in second half as Libra will undergo a realignment of cost after the acquisition of Cyber Builders.
  • Cyber Builders has a BCA license C1 main contractor which enable the group to tender for public sector projects of up to S$4.2m.
  • Group will examine other regional opportunities as property markets in Singapore remains weak.
  • To reduce its dependency on M&E segment, the group is looking to diversify its business and highlighted a few particular industries in properties, trading of construction materials, hospitality and tourism, as well as expanding the existing M&E services to offshore and marine industries.
  • Libra Group is expecting its new factory located in Loyang Drive to be completed in 4Q16 which will house all divisions and support its operations under one roof.

Our view:                

At S$0.156, Libra Group trades at 0.9x PBR or 4x annualized FY15 PER. We consider its near-term valuation is undemanding given its strong order book on hand. However, its high net gearing (above 90%) could pressure its net profit margins from the increasing interest rate could be a concern. Despite BCA highlighted the average construction demand in Singapore’s private and public sector projected in 2015 to sustain around S$29~36b (-25.2% ~ -7.1% yoy), Libra Group managed to increase its market share in 1H15.

 

Additional Company Specfic ReportsDate
Libra Group Limited – 1H15 results briefing
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18 August 2015


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