• FY15 results broadly in line
• Public construction outlook still firm
• Diversifying overseas and into recurring income

FY15 PATMI down 8.5% to S$42.1m

KSH reported that PATMI for FY15 (ending Mar 2015) decreased 7.0% to S$41.7m versus S$44.8m in FY14. This was mainly due to reduced contributions from both the construction and development businesses, lower fair value gains on investment assets and higher personnel expenses, but partially offset by higher interest income. In terms of the topline, the group booked S$246.1m in revenues over FY15, down 15.7% again mostly due to lower numbers from the construction segment. We judge these results to be broadly within expectations. A final cash dividend of 1.50 S-cents was proposed, which brings the total dividend distribution for FY15 to 2.75 S-cents per share.

Actively diversifying business portfolio

Amidst a slowdown in the domestic residential sector, KSH has actively diversified its business exposure overseas (China, Australia, Malaysia and the UK) and into investment assets that yield recurring income as well. In addition to its acquisition of Prudential Tower as part of a consortium, KSH has acquired in Apr 2015 a stake in a freehold asset on Glenthorne Road, London, which will be redeveloped into an 85-room serviced apartment.

Riding on firm outlook for public construction

Management indicates that the construction sector continues to face headwinds in the form of rising costs. The group intends to leverage on its strong track record and BCA A1 rating and, in addition to private construction projects, will maintain a dual focus on tendering for public projects for which demand is anticipated to stay strong due to government infrastructure initiatives. In line with this, we note that the group has recently won a S$33.2m contract from NUS – a repeat customer - to build a 3-storey University Sports Centre Building. As at end FY15, the group’s construction order book stands at a respectable level of around S$420m. Maintain BUY with an unchanged fair value estimate of S$0.71.

Source: OCBC Research - 2 Jun 2015