"According to our checks, customers with big projects are more inclined to choose BRC because of its ability to handle large-scale projects," write analysts Lee Eun Young and Amanda Tan in their Dec 6 note.
"This places the group in a good position to benefit from the upcoming ramp-up of HDB projects and other major projects such as the Changi Airport Terminal 5 and expansion of the integrated resorts."
Citing official projections, construction demand is seen to be held at $25 billion to $32 billion per year between 2024 and 2027.
"Despite external headwinds, Singapore’s healthy economic fundamentals should continue to attract investments. Hence, private sector construction demand should likely remain stable," the analysts say.
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"With steady construction demand, we expect construction output and consequently demand for BRC’s solutions to remain firm in the medium term," they note, adding that key projects in the pipeline include the Cross Island MRT line and Downtown Line extension.
BRC Asia's "strong" order book of $1.3 billion and accelerating site progress will be key drivers for the current FY2024.
Over the past year, construction tempo in Singapore slowed because of a slew of fatal accidents, to observe the so-called "heightened safety period", which ended in May.
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Since then, the company has already observed a general acceleration in the progress of local construction post the HSP.
"However, intermittent periods of downtime due to safety concerns and resource constraints will remain. Additionally, higher electricity, manpower, and financing costs could exert some pressure on margins in the construction industry, which may eventually flow through to BRC," according to Lee and Tan.
Their higher target price of $2 is premised on a new valuation multiple of 8x which is slightly above +0.5SD of the historical mean.
Separately, Peggy Mak of PhillipCapital has kept her "buy" call and $1.99 target price on BRC Asia.
In her Dec 6 note, Mak expects that the company's average selling price has bottomed and will remain stable. She estimates demand volume to increase by 20% this current FY2024 in line with a pick up in construction activities.
