PhillipCapital analyst Yik Ban Chong has maintained his “accumulate” call on BRC Asia at a raised target price of $3.15 from $2.80 previously on the group’s record order book of $1.5 billion as at Dec 31, 2024.
Yik writes in his Feb 13 report: “BRC Asia states that the order book ranges up to five years, although we believe most can be completed within three years due to construction projects ramping up.”
He adds that with the construction of Changi Airport’s Terminal 5 beginning in the first half of 2025, as well as the expansion of the integrated resort at the southern end of Singapore, ongoing public housing and MRT projects, he expects strong revenue growth within the next three years.
Meanwhile, BRC Asia’s 1QFY2025 revenue and profit after tax and minority interests (patmi) were within Yik’s expectations at 22% and 22% respectively of his FY2025 forecast.
He notes: “Revenue declined by 12% y-o-y due to an estimated 9% y-o-y fall in steel prices and safety time-out (STO) in November 2024. Patmi increased 14% y-o-y, which was impacted by major project delays.”
Overall, Yik is bullish, with construction demand in Singapore increasing to an average of $42.5 billion annually over the next four years.
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“We lowered [our] weighted average cost of capital (WACC) to 11.6% to reflect greater visibility of upcoming construction projects.”
Despite the bright outlook, the analyst sees headwinds from lower steel rebar prices. The group’s revenue, being closely tied to steel rebar prices, fell 12% y-o-y in the 1QFY2025 due to steel prices sliding 9% y-o-y.
On this, Yik writes: “We believe steel rebar prices can continue to fall around 10% y-o-y in FY2025 due to weak demand from China’s construction sector. In the near-term, engineering drawing delays could also cause revenue growth to slow.”
As at 11.06 am, Shares in BRC Asia are trading 3 cents higher or 1.03% up at $2.93.
