Serving customers from various industries such as infrastructure, construction and oil and gas, the majority of Sin Heng’s orderbook is from the Land Transport Authority and Public Utilities Board, UOBKH points out.
Some of these projects allow cranes to work longer hours, increasing the profitability of the cranes. To top it off, these government contracts are longer term and provide good orderbook visibility, the analysts say.
Additionally, similar to 2022’s projection, the Building and Construction Authority expects total construction demand in 2023 to range from $27 billion to $32 billion. This will be mainly driven by the public sector, which is projected to contribute roughly 60% of the demand, UOBKH highlights.
“The government’s deep pipeline of projects — comprising a ramp-up in supply of Build-To-Order flats, construction of industrial and institutional buildings as well as MRT lines — sets an optimistic tone for Sing Heng,” they add.
The major infrastructure projects include the Cross Island Line (Phases 2 and 3), Downtown Line Extension to Sungei Kadut, Brickland North South Line station, Toa Payoh Integrated Development and Woodlands Checkpoint redevelopment. These projects are set to be completed within the decade of 2030, pointing to escalated long-term demand for Sin Heng’s services, UOBKH says.
As at end-2022, Sin Heng was in a strong net cash position of $30.4 million despite a 62.7% increase y-o-y in capital expenditure to $22.4 million which incurred during the year.
The company had also recently proposed a first and final dividend of 1 cent per share and a special dividend of 2.5 cents per share, bringing the total dividend to 3.5 cents per share. This represents an attractive 8% dividend yield which appears sustainable moving forward with its strong net cash position, UOBKH notes.
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The analysts highlight that Sin Heng is currently trading at around 0.5x 2022 P/B, which is a discount of around 50% versus its peers’ average of 2022 P/B of 1x.
As at 9.08am, shares in Sin Heng are trading at an unchanged 43 cents.
