• FY14 revenue grew 102%
• Order book of S$121m
• Strong management execution

FY14 PATMI up whopping 9.2 times

Libra Group achieved a solid set of results for FY14, underpinned by sharp execution from the new management team. Revenue was up 102% to S$63.7m, as its M&E segment revenue increased 161.8% to S$46.0m and contributed 72% of full-year revenue. Revenue from its manufacturing segment rose 24.8% to S$16.2m, but there was a dip in manufacturing margin as the group focused on gaining market share. That said, overall gross profit margin improved by 5.7 ppt to 23.1% (FY13: 17.4%) on the back of better project execution and productivity. The group’s turnaround story continues, as PATMI grew a whopping 9.2x to S$5.3m. Notably, its receivables days also improved from 185 to 142 days through effective management control.

Contract wins boost order book

A positive momentum in contract wins also brought their order book up to S$121m as of 31-Dec 2014, which is an 124% increase from FY13’s order book of S$54m. About S$12m comes from its upstream main contractor segment, which may start contributing to the group’s bottomline in the next two years. We believe that the license upgrades for its M&E segment and further contract wins will add to the sustainability of Libra’s continued growth ahead.

Higher gearing was expected

As mentioned in our initiation report, the increase in the group’s gearing (FY14: 73%) was due to the factory acquisition at S$16m in late 2014. The new factory is slated to help contain costs with potential rental savings of at least S$1m. We believe good margins and management of its cash conversion cycle will help maintain a healthy balance sheet going forward.

Maintain BUY with new FV of S$0.37

The group declared a final DPS of 0.7 S-cents, with total DPS of 0.12 S-cents giving a 5% div  yield. Maintain BUY. Our fair value estimate is increased to S$0.37, from S$0.33 previously, based on a 4.8x blended FY15/16F P/E.

Source: OCBC Research - 2 Mar 2015