Yongnam drops low with 46% less revenues

It has been difficult since 2013.

Steel contractor and specialist civil engineering solutions provider Yongnam Holdings continues to see business decline due to competition and the changing nature of projects.

In a media release, Yongnam announced that it had enjoyed several years of record profits because of the group’s involvement in a number of iconic projects in Singapore. Since last year, however, it has experienced decline in gross margins that were further eroded by cost overruns.

With the completion of the mega Marina Coastal Expressway (“MCE”) contracts at the end of FY13, the Singapore Sports Hub at the end of 1Q14 and no new project secured in 1Q14, the company’s revenue dropped by 46.5% to $61.6 million, compared to $115.1 million in 2Q13. On a quarterly basis, group revenue fell by a lower 14% from $71.8 million in 1Q14.

Here’s more from Yongnam:

The group will obtain TOP for its wholly-owned DBSS project Belvia in 3Q14, which we expect to contribute SGD40m in net profit. In 4Q14, the group will be able to recognise SGD115m when its retail project at Alexandra Central obtained TOP. The construction arm, meanwhile, currently sits on a backlog of SGD548m, primarily for HDB contracts, and should contribute SGD20m profit on a normalised basis. We continue to see value in the stock with the stock trading at a 50% discount to its RNAV of SGD1.63 and a dividend yield of 5%.

“FY2014 will be a challenging year as the Group’s performance is dependent on securing new contracts in the remaining months of this year. Even if secured, most of these new contracts will start contributing only from the last quarter,” added Mr Seow.

Going forward, the Group is further reviewing its project cost management to improve cost efficiencies and put in place additional checks and balances to ensure better project management and cost effectiveness.