"As taller buildings face more gravitational and lateral loads, they require more complex structural systems that incorporate more structural and reinforced steel," says Ong.
While the company does not produce structural steel components, she expects it to benefit from the increased cut-and-bend and mesh elements required for higher-density developments.
Citing statistics from the Building and Construction Authority, construction demand in the first 8 months of the year, based on contracts awarded, was up 8% y-o-y; steel demand from Jan to July was up 25$ y-o-y, which is at the higher end of BCA’s projections for the whole of 2025.
Ong is reiterating her "add" call for this stock as BRC Asia, as the market leader with a share of more than half, is benefitting not just from the construction upcycle but also growing interest in small- to mid-caps here in Singapore.
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Her higher target price of $5.30 is pegged to 1 sd of BRC’s 12-year P/E of 15x, versus the 20-year historical construction cycle high of 12x used previously.
Ong says that over the last seven years, dominant building material players in Singapore — BRC Asia and Pan United Corp traded at 13x/17x forward P/E at the +1/+2 s.d. levels.
Re-rating catalysts include strong improvements in offtake volumes, earnings-accretive M&A while downside risks include counterparty credit risks, economic slowdown negatively impacting construction demand.
BRC Asia shares changed hands at $4.29 as at 2.26 pm, down 0.92% thus far today but up 68.24% year to date.
