However, revenue for the period fell by 6% y-o-y to $716 million on lower steel prices, but was offset by higher delivery tonnage, which Ong estimates to be 5% higher y-o-y.
BRC Asia’s order book also hit a new high of $1.5 billion as at March 31.
Ong also likes that the steel company delivered on its mergers and acquisitions (M&A) strategy with its proposed 55% stake acquisition of Southern Steel Mesh.
In April, Mainboard-listed BRC Asia announced that it entered into a conditional share purchase agreement with the Malaysian group for RM61.1 million or $18.2 million.
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With the purchase, Ong estimates BRC will gain a 15% share within the Malaysian market, up from its previously “negligible” share from its manufacturing plant in Johor.
“Management believes that the acquisition of Southern Steel Mesh is a value-unlocking play, which will require updating Southern Steel Mesh’s machinery and aligning Southern Steel Mesh to best-in-class practices/ benchmarks, putting Southern Steel Mesh in a better position to compete with the other major downstream steel manufacturers that have ageing machinery and dated technology,” says Ong in her May 26 report.
The acquisition will be subject to an extraordinary general meeting (EGM), which is to be convened, as Southern Steel Berhad, the parent company of Southern Steel Mesh, is a subsidiary of BRC’s controlling shareholder, Green Esteel.
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Ong has maintained her “add” call as she believes BRC Asia’s high dividend payout is sustainable for the FY2025 to FY2027 amid “healthy industrial fundamentals”.
The analyst has raised her earnings per share (EPS) estimates for the same period by 4.2% to 6.7% as she lowers her operating and finance expense estimates.
With her earnings revisions, Ong’s target price is increased to $3.40 from $2.70 previously. Her new target price is pegged to BRC Asia’s calendar year (CY) 2025 P/B of 1.9 times or 0.7 standard deviations from the company’s 20-year historical P/B.
As at 12.06pm, shares in BRC Asia are trading 3 cents higher or 0.96% up at $3.15.
