• FY16 PATMI up 48% YoY
• In line with expectations
• Enjoys net cash position

FY16 PATMI up 48% YoY due to Chinese project boost

KSH reported that its FY16 PATMI (ending Mar 2016) increased 47.6% YoY to S$61.5m mostly due to a significant increase in the share of results of associates from S$26.5m in FY15 to S$48.4m in FY16, partially offset by higher personnel and other operating expenses.

The boost in share of results of associates was mainly attributed to a S$15.0m contribution from Liang Jing Ming Ju Phase 4 in Beijing, China, as well as higher revenue recognized at domestic development property projects. In terms of the topline, KSH’s FY16 revenues remained mostly flat at S$245.5m (down 0.3% YoY) as construction revenues dipped 0.3% YoY to S$239.2m and rental income from investment properties grew 1.5% YoY to S$6.3m.

Overall, we judge this set of results to be within expectations and FY16 PATMI constituted 105.7% of our FY16 forecast. A final and special cash dividend of 1.50 S-cents and 0.50 S-cents per share was also proposed.

Diversified asset portfolio and a strong balance sheet position

As at end Mar 2016, KSH’s construction order book stands at a fairly healthy S$223.0m. In its property development business, the group reported that it has sold ~91.0% of its 14 launched projects, which translates to S$258.2m in attributable progress billings.

In addition, we understand that while the management team has been actively tendering for construction projects, they also focused on diversifying the group’s asset base geographically and strengthening its recurring income streams. In 2016 to date, KSH has acquired with its partners a 15-storey hotel and 14-storey residential block in Hokkaido, Japan; and in the UK, a 12-storey hotel in central Manchester, an 86-room hotel in central Bradford and a 127-room hotel in Gloucester City.

The group continues to enjoy a strong balance sheet with a net cash position and now has footprints in five countries outside of Singapore, including the UK, Japan, China, Australia and Malaysia. Maintain BUY with an unchanged fair value estimate of S$0.61.

Source: OCBC Research - 2 Jun 2016