Starburst Holdings's (Starburst) FY16 net loss widened 605.7% to S$11.7m despite a 14.8% jump in revenue to $18.3m, as project delay at Marina One continues to put a drag on its earnings.

Revenue growth can be attributed to the different work phases that its projects were in (percentage of completion revenue recognition), and was driven by Marina One architectural steel project, as well as design, fabrication and installation work phases for three firearm shooting range projects in the Middle East (compared to final phases of two projects in FY15 that recognized lower revenue).

Project and production costs surged 75.9% to S$21.2m, with the increase mainly due to higher fabrication and installation costs and foreseeable losses provided for the Marina One architectural steel project due to project delay. As a result, total operating expenses increased 54.1% to S$29.1m for FY16.

The income tax expense of S$1.0m incurred in FY16 (due to de-recognition of a deferred tax asset) compared to a S$1.2m income tax benefit in FY15 worsened Starburst’s bottom line. Pending further clarity from management, we are placing both our HOLD rating and FV of $0.30 under review.

Source: OCBC Research - 2 Mar 2017