• Slowdown in revenue and PATMI
• Better revenue for B&C segment
• Challenging operating environment

YoY Decline in 1H17 PATMI

Libra Group reported a 30.2% decline in 1H17 revenue to S$30.8m and PATMI fell 52.5% to S$0.76m. The decline in revenue was due to

1. lower mechanical and electrical engineering (M&E) revenue by 42% to S$18.3m,
2. lower manufacturing revenue by 20% to S$6.0m, but partially offset by
3. higher revenue from building and construction solutions (B&C) segment which increased by 25% to S$6.5m on the back of increasing project realization.

As a result, gross profit was also lower with a slightly lower gross profit margin of 18.3% vs. 19% in 1H16. Due to lower bonus and incentives incurred during the year, administrative expenses decreased 25%. There was also a slight increase in ‘other income’ to S$1.0m due to a gain on disposal of a factory in Ang Mo Kio. Net result was a slowdown in bottomline.

Contract Wins Continue

Notably, the group announced that they have won a few contracts with a total value of approximately S$42m. This included

1. a contract for the proposed new erection of one block of 5-storey residential building along Koon Seng Road,
2. a sub-contract for the supply, installation, construction, completion and maintenance of architectural works to Lentor Station and
3. a sub-contract for works at Stevens Station.

Works for the first contract is scheduled to complete in 2018 while the other two are to complete in 2020.

Ceasing Coverage

Looking ahead, the group believes that the operating environment remains challenging with continuous pressures on contract value and tough competition for new projects to be secured. Nonetheless, they will continue to focus on cost control while managing the completion of existing projects. They will also pursue investment opportunities beyond Singapore. With that said, due to an internal reallocation of resources, we are ceasing coverage on the stock.

Source: OCBC Research - 17 Aug 2017