Selling prices dropped 14% in the quarter but volume and margins gained, implying benefits of economies of scale enjoyed by the company, says Ong.
She points out that BRC Asia holds a strong market position within Singapore, with its own management estimating a share of between 55 and 60%.
It is one of the two key suppliers providing steel for Housing Development Board (HBD) build-to-order (BTO) projects and one of the six major players supplying rebar in the Singapore market. Significant projects won recently include a $570 million order for the construction of the airport's Terminal 5, which helps lift BRC Asia's order book to $2 billion as at July.
Down the road, BRC Asia is to become bigger. It has completed the first phase of the acquisition of a related company Southern Steel Mesh.
"The acquisition, which the management believes is a value-unlocking play, will require updating SSM’s machinery and aligning SSM to best-in-class practices/benchmarks, putting SSM in a better position to compete with other major downstream steel manufacturers that have ageing machinery and dated technology," says Ong.
In his separate note, Yik Ban Chong of PhillipCapital has similarly raised his target price for the stockm, while keeping his "accumulate" call. From $3.40 earlier, he now rates this counter worth $4.10.
"With about 60% market share in steel rebar in Singapore, we believe BRC Asia can secure more contracts with the rising construction demand in Singapore," says Chong.
BRC Asia shares changed hands at $3.88 as at 1.58 pm, up 3.19% for the day and up 52.16% year to date.
