• FY15 revenue up 42%
• BCA grade B1 for Cyber Builders
• FV slightly lower at S$0.25

Growth helped by B&C segment

Libra Group’s FY15 results were within our expectations. Revenue grew 42.3% to S$90.6m, meeting 95% of our FY15 estimate. This was driven by higher revenue attained by the mechanical and electrical engineering (M&E) segment, manufacturing segment, as well as the building and construction solutions segment (B&C).

Notably, B&C has seen some progress especially following the acquisition of Cyber Builders, with revenue reaching S$13.6m (FY14: S$1.5m), and the company has attained an upgrade in its BCA grade from C1 to B1 category, allowing it to tender for projects of up to S$42m.

Despite higher expenses, PATMI grew 18.1% to S$6.3m. Excluding ‘other income’ of S$0.9m, PATMI of S$5.4m was within our expectations, as it formed 96% of our full year estimate.

GPM estimated to sustain around similar levels

Overall gross profit margin (GPM) dipped from 22.6% to 19.6% this year, attributable to a few factors. First, recall that the group had consolidated the results of Cyber Builders post acquisition completed in April 2015. In addition, M&E segment saw GPM decline 2.7ppt to 19.6% due to more competitive pricing submitted for projects secured.

While B&C’s GPM improved from a loss in FY14 to 16.7% in FY15, this level is also relatively lower than the other segments, thus bringing down overall GPM. We estimate GPM to sustain around similar levels for FY16F, on the back of management strength and adoption of value engineering.

Total DPS of 1.2 S-cents maintained

The group’s net gearing is at ~1.3x, whereby the increase in short-term debt was mainly due to mortgage loans for two properties, as well as increase in trade financing and project factoring. We expect this to be pared down to more reasonable levels.

Given the above and general challenging outlook, based on 4.5x FY16F P/E, our fair value estimate is slightly reduced from S$0.27 to S$0.24. A final DPS of 0.7 S-cents was declared, bringing total DPS to 1.2 S-cents, similar to last year. At current price level, this gives a dividend yield of ~9%. Maintain BUY.

Source: OCBC Research - 1 Mar 2016