Drastic disappointment: Yongnam might end FY14 in the red as revenues slip 46.5%

Its order book is steadily dwindling.

Yongnam posted remarkably disappointing results this quarter, as it registered its third straight quarter of decline and missed consensus expectations.

According to CIMB, 2Q14 revenue fell 46.5% yoy and 14.2% qoq as the specialist civil engineering (SCE) unit’s contribution dropped 33% yoy to S$29.7m.

Yongnam was also beset by the same old problems that it encountered last quarter, namely ongoing projects that are insufficient to match the contribution from the MCE projects that were completed last year.

It also dealt with a higher interest burden through more borrowings and deteriorating margins, which all contributed to another quarter of loss

According to CIMB analyst Gary Ng, “We have made drastic cuts to our FY14-16 estimates, having accounted for sluggish revenue assumptions, margin pressure and the lack of contracts. We concluded that the group would end FY14 in the red. he lack of immediate contribution from high-yield contracts and margin squeeze are potential de-rating catalyst.”