TIONG SENG: 2017 shaping up to be best in 5 years

2012 2013 2014 2015 2016 1H17 Net profit attributable to shareholders $25.7m   $9.3m ($15.3 m) $10.2 m $15.3m $14.3 m This year is shaping up to be the best in five years for construction company Tiong Seng Holdings. Stock price  32 c 52-week range 21 – 38 c PE (ttm) 6.8 Market cap S$144.4 m Shares outstanding 451.4 m Dividend yield (ttm) 2.5% Year-to-date return 42% Source: Bloomberg Its 1H2017 net profit of $14.3 million is only a whisker away from the $15.3 million achieved for the entire 2016 -- and exceeds the performance of the full years 2013, 2014 and 2015. Not surprisingly, its stock price (32 cents) is up 42% in the year to date. And the company has bought back 2.61 million of its shares so far this year. Pek Lian Guan, CEO, Tiong Seng Holdings. NextInsight file photo

Its 2Q performance, announced last week, showed that the construction segment continued to be the star contributor.

Its revenue surged 36.5% to S$399.6 million as it entered into a ramp-up phase for various projects.

Segment profit for construction was $22.5 million while it was a loss of $1.6 million for the property development segment, largely on a fall in revenue recognition (S$23.8 million versus $111.7 million in 1H2016).

Ken Choo, CFO of Tiong Seng. NextInsight file photoOperating cash flow in 1H17 was strong at S$53.3 million, enabling Tiong Seng to repay a whopping $50.2 million in borrowings in 1H17.

This reduced its total borrowings to $126 million, the lowest level in at least the past five years. 

Its gearing ratio continued to improve to 0.40 (31 Dec 2016: 0.55). 

Risk: Tiong Seng's construction orderbook has dropped from $1.3 billion in June 2016 to $1.0 billion at the start of 2017 to $730 million at end-June 2017. 

Its strategy:

♦ The creation of a civil engineering unit to target infrastructure projects.

♦ Maintain its leadership position in the industry by consistently investing in construction technologies. (See: TIONG SENG @ Singapore Construction Productivity Week 2016)

♦ Tapping on increased government legislation for more labour-saving technologies.