Speaking to The Edge Singapore on Aug 26, Xu notes that the group has fulfilled the requirements of a Mainboard listing, including the market capitalisation limit of $150 million and above, based on the issue price and post-invitation issued share capital.
As at Aug 27, Ever Glory United’s market capitalisation stood at $229.4 million after its shares closed at 65.5 cents apiece, nearly three times its initial public offering (IPO) price of 22 cents in May 2023. The group had raised $3.1 million during its listing process, with 14 million of its placement shares fully subscribed.
Under Mainboard listing rules, issuers must have a three-year track record, and either a $30 million pre-tax profit, or any pre-tax profit plus market capitalisation of $150 million.
For FY2024 ended Dec 31, 2024, Ever Glory United’s profit before tax stood at $10.4 million, 21% higher than the previous figure of $8.6 million in FY2023. This still marks a significant jump from the group’s audited profit before income tax of $1.1 million in FY2020, $630,000 in FY2021 and $2.1 million in FY2022.
Jason Saw, group head of CGS International’s (CGSI) investment banking business, is bullish on the group’s prospects. CGSI is the placement agent for Ever Glory United’s proposed placement to raise up to $17.1 million by issuing 31 million new shares at 55 cents apiece.
Including bonus issues, the placement price of 55 cents is 10 times higher than the IPO price. Even then, CGSI is happy to support the transaction given that they have a proven track record of growth since listing, Saw tells The Edge Singapore on Aug 27.
He also pointed out that, net of fees, Ever Glory United would have made an estimated $1 million from its IPO, but has paid out $5 million in dividends since. “This shows that the business is cash generative.”
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He adds that the group’s next stage of growth is “interesting”. Following the acquisitions of Fire-Guard Engineering in February last year for $4.3 million and Guthrie Engineering in July for $46 million, Saw believes the group is set for more growth ahead.
For 1HFY2025, however, Ever Glory United’s revenue and net profit fell by 11.1% and 18.6% y-o-y to $28.6 million and $4.7 million, respectively. Xu points out that, including its share of results of joint ventures of $1.8 million, revenue and net profit would have been relatively flat y-o-y. He adds that the group’s actual operational profit margin increased, while the lower bottom line was due to one-off acquisition costs.
Ever Glory United and more
The company went IPO at a time when broader investors’ interest in new SGX listings was thin. Compared to many other construction and engineering firms here with decades of track record and those with second- or even third-generation owners now at the helm, Ever Glory United is relatively new.
Xu and Sun Renwang, Ever Glory United’s chairman, started an entity called Sunbeam M&E in May 2018 and Ever Glory was incorporated in December 2021. Today, Ever Glory United has four companies: Sunbeam M&E, Guthrie Engineering, Fire-Guard Engineering and Ever Capital, which is involved in property construction and property investment. So far, PhillipCapital’s Yik Ban Chong is the only analyst with an active coverage of the stock, giving it a “buy” call and target price of 81 cents.
To Xu, the group’s strategy made sense, as it wanted to achieve key milestones before engaging more actively with analysts, investors and the media. “When we set up Sunbeam, our first target was to list within five years,” he says. However, instead of listing to raise funds, the purpose of the IPO is for three reasons: branding, acquisitions and diversification, he adds.
Xu notes that listing on the SGX would cost as much as advertising for the sake of branding on one of the buildings along Orchard Road, and listing would provide more benefits, such as the flexibility to tap the capital markets for resources to fund acquisitions.
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True enough, the group had conducted two acquisitions in the two years since it was listed. “We wanted to expand quickly, and the best way to do so was to be in partnership with companies we have good relationships with and even friendly competitors,” says Xu.
According to him, Fire-Guard was acquired after its then-owner wanted to retire. Guthrie Engineering, previously part of Guthrie GTS, which can be considered the group’s crown jewel, was initially seen as an ambitious acquisition, given its relative size and history.
Guthrie Engineering, since 1951, has undertaken various projects for notable clients, including Marina Bay Sands, Jewel Changi Airport, and the Thomson-East Coast MRT Line.
However, due to the pandemic, Guthrie Engineering reported a $50 million loss and was put up for sale.
A Chinese state-owned enterprise was initially in the midst of taking over Guthrie Engineering, says Xu. However, the deal was delayed for nearly a year, he adds. This opened the door for Ever Glory United, which was not initially considered an acquirer due to its size and was deemed to be a “spare tyre” during the initial stages of the deal. In what can now be seen as serendipitous, Ever Glory United’s market capitalisation started gaining steadily to $100 million and above when talks were restarted in January.
“If we were just at $50 million [when Guthrie wanted to sell its M&E business for $50 million in February 2024], we couldn’t have bought it as it would have been a reverse takeover (RTO) and not an acquisition,” says Xu.
He adds: “There are more than $50 million of accumulative losses in Guthrie Engineering’s account right now, and with the current market strength we look forward to recover such losses in the upcoming three to four years”.
Today, he notes, the market appears to agree with the move, as evidenced by its share price surge following the sale. “Now that we have acquired Guthrie, we can be easily considered as Singapore’s top M&E group,” says Xu.
He adds that the group bought Guthrie M&E to position itself for the construction boom, which includes projects such as Changi Airport’s upcoming Terminal 5 (T5), as well as projects from the Land Transport Authority (LTA) and hospital projects from the Ministry of Health (MOH).
“We acquired Guthrie because it can do the biggest projects, whereas if we had tendered under Sunbeam, we would have been disqualified as it did not have a track record,” he adds. “Guthrie has track records, and when it comes to various projects, Guthrie, which has six divisions, will be considered for them.”
When asked what the group looks for when making acquisitions, Xu considers a strong base and good branding as key factors.
“When we look at acquiring these companies, they already have to have value, and we can add value after the acquisition. We can’t be buying without good reason,” he says.
The group’s latest placement has further strengthened its standing. Xu notes that beyond fundraising, the move has increased the group’s visibility and liquidity. As indicated in its annual report, as at March 19, Xu and chairman Sun each hold 98.4 million shares, equivalent to 37.86% of the company.
Xu adds that Ever Glory United can handle up to double its current order book, supported by Guthrie’s resources. “Before the government opens up more projects, we need to prepare our resources.”
When asked if he was worried about resources for the upcoming surge, Xu says, “We are paying our sub-contractors on time or even ahead of schedule if they ask for help”. He adds that the group has sufficient projects to award the sub-contractors and is always looking at having a long-term and win-win working relationship with them.
Five-year horizon
In the near future, given the “hot” construction industry, Xu believes the M&E industry will grow from its present average profit margin of 6% to 8% to around 11% to 13%, up some five percentage points.
Ever Glory United’s margins itself is already five percentage points higher. “We can’t be performing worse than the market,” says Xu. He attributes the group’s above-average margins to his team’s engineering knowledge, which creates efficiencies. The group has a team with over 20 to 30 years of experience, excelling in value engineering, design and build capacity, and overall planning and management.
When asked if he’s afraid of his employees leaving for his competitors, Xu says he isn’t too worried given the group’s benefits such as a performance share plan for all of its employees and good training programmes, opportunities for their careers.
Dividend payouts remain a priority. Xu recalls promising investors at its IPO that Ever Glory United would return value quickly. “At [our] IPO, I made three commitments: [to have the] highest dividend ratio, fastest expansion, and to join the Mainboard within five years,” he says. Based on its IPO price, the group’s current dividend yield is nearly 20%.
For the moment, the group’s strategy remains focused on Singapore. Projects such as Changi T5 and Alexandra Hospital’s upcoming redevelopment are among the big-ticket tenders where Guthrie Engineering gives Ever Glory United an edge.
The Edge Singapore understands that investors are generally positive about Ever Glory United based on the feedback received so far.
In PhillipCapital’s report, analyst Chong notes that the group will see favourable tender opportunities with the acquisition of Guthrie, expanding its opportunities.
“We believe Ever Glory United can continue to secure order wins in the next two years, mainly from schools, hotels, mixed-use developments, and industrial facilities. Ever Glory United’s strength in design and build services in M&E projects has allowed it to deliver an average net profit margin of 10.8% over the past three years — well above the low- to mid-single digit average typically seen among Singapore-listed construction companies,” Chong writes.
Guthrie Engineering’s impressive track record in various landmark projects, as well as its order book of $312 million as of December 2024, 4.2 times Ever Glory United’s FY2024 revenue, will also support the group’s plans to grow its M&E engineering business and expand into switchboard and other manufacturing, he adds. “We believe the acquisition would allow Ever Glory United to bid for higher-value projects in the future, such as Changi Airport T5, integrated resorts, hospitals and data centre projects in Singapore.”
Asked what he would like investors to remember about Ever Glory United, Xu says it is vital that the group keeps its promises. “The earlier you believe in us, the bigger the benefits you’ll reap,” says Xu.
Correction note:
This story has been updated to correct the Mainboard listing requirements in the fifth paragraph
