“Lum Chang Creations is the only listed urban revitalisation specialist (URS) service provider in Singapore, with an estimated market share of between 14.4% and 17.0% in 2024, according to an independent market report in [the company’s] prospectus,” Li and Lock write in their Aug 27 report.
“Conservation work requires deep expertise, which makes the barriers to entry higher than other types of construction work,” they add. “Lum Chang Creations was behind the conservation work of some of Singapore’s most high-profile historical buildings, such as Temasek Shophouse, the National Museum and The Warehouses-CQ @ Clarke Quay.”
Over FY2025 to FY2027, the analysts expect Lum Chang Creations to secure $75 million to $150 million in order wins with potential conservation projects such as 45 Armenian Street, the former St. Joseph’s Institution building and the former Bukit Timah Turf City.
The analysts are also upbeat over Lum Chang Creations’ forward pipeline for other projects given that maintenance, refurbishments and asset enhancement initiatives for commercial space and hotels take place regularly. “Lum Chang Creations could also benefit from new projects, such as Changi Airport Terminal 5 and the new phases of Marina Bay Sands and Resorts World Sentosa, in our view.”
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According to Lum Chang Creations’ prospectus, the company reported an order book of $122.8 million as at May 31. The analysts have also estimated that the company secured orders totalling $142 million in FY2024.
In addition to its work in Singapore, Lum Chang Creations indicated that it plans to expand its business in Malaysia, which could extend its project pipeline to include more retail and hotels, the analysts note.
In their view, key re-rating catalysts include higher-than-expected order wins and margin expansion while unfavourable government policies including a higher ratio for local labour content or levies that may impact margins are downside risks.
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More competition within the URS space, which could lead to pricing competition and compressed margins, a shortage of skilled labour, as well as project defects are other downside risks.
Li and Lock have initiated a target price of 81 cents, which is based on a P/E multiple of 12 times, in line with Lum Chang Creations’ peers. The figure also represents an upside of 47.3% to the company’s last-closed price of 55 cents as at Aug 26.
As at 9.50am, shares in Lum Chang Creations are trading 4.5 cents higher or 8.18% up at 59.5 cents.
