Starburst Holdings Limited’s (Starburst) FY15 PATMI came in at a slight loss as we expected. FY15 revenue dropped 59.5% to S$15.9m due to lower contribution from fabrication and installation works on completion of a firearm shooting range project and a tactical training mock-up project, both in Southeast Asia (SEA) and Middle East (ME).

FY15 gross profit plunged 82.4% to S$3.9m due to delay in handing over of project infrastructure by the main contractor to Starburst and higher than expected costs for a project that saw changes to requirements. Hence, FY15 operating expenses fell by a slower rate of 21.0% YoY.

Furthermore, new fire shooting ranges contracts from the ME have yet to contribute meaningfully as they were still at the beginning of fabrication work phase. Consequently, Starburst reported a net loss of S$1.7m in FY15 compared to net profit of S$13.2m in FY14. As we continue to expect earnings recovery in FY16, and pending more details from management, maintain BUY but place our FV under review for now.

Source: OCBC Research - 29 Feb 2016