• 3QFY15 PATMI down 76.5% YoY
• JV stake in Filipino energy infrastructure project
• Expects challenging operating conditions

3QFY15 PATMI down 77% YoY to S$0.13m

Tee International (TEE) reported that its 3QFY15 PATMI dipped 76.5% YoY to S$0.13m mostly due to weaker gross margins, and higher admin and finance expenses. In particular, we note that admin expenses increased 14.5% YoY (S$0.7m) given marketing costs incurred for a property development project in Malaysia by TEE Land. 9MFY15 PATMI cumulates to S$2.9m, down 5.6% YoY, which we deem to be below expectations. We revise our FY15 forecast downwards to S$6.0m and introduce FY16 estimates of S$8.8m. The group’s order book for the engineering segment now stands at S$410m, and major projects include Marina One, Tampines Hub and Changi Airport, as well as MDIS Educity@Iskandar, St Regis and The Parisian in Macao.

Expanding into the energy infrastructure space

TEE also recently expanded into the energy infrastructure space and, in Feb 2015, entered into a JV agreement to construct a 25 MW greenfield power plant in Iligan, Philippines and a power sales agreement to supply power to a nearby cement plant and to the City of Iligan, Mindanao. The total off-take of the two power sales agreement will amount to 20 MW out of the total 25 MW capacity. We understand that the group is looking to further expand their energy portfolio in the Philippines.

Rated HOLD with S$0.24 FV estimate

Looking ahead, the group expects the competitive operating environment to stay challenging and will take a prudent stance in evaluating growth prospects in Singapore and the region. That said, while management are cautious on the muted property market in Singapore and Malaysia, it is confident of the long term prospects of the real estate market in Thailand, New Zealand and Australia; and the group’s real estate subsidiary, Tee Land, has recently acquired another hotel in Sydney, Australia, and a property in Christchurch, New Zealand. We have a HOLD rating on TEE with a fair value estimate of S$0.24.

Source: OCBC Research - 16 Apr 2015