Acromec braces for waves of tougher competition

Delays in public tenders towards 4Q16 also a major drag.

Due to lacklustre activities in the oil & gas space, many engineering specialist firms appear to have begun competing for public sector jobs in the healthcare space. RHB believes that this will likely lead to steeper competition in tender bids, and potential margin compression for the projects tendered.

"We expect Acromec Limited (Acromec) to be impacted, and project lower margins in 2H16," it said in a report.

The research firm also reveals that it channel checks found that there has been a slowdown in the issuance of Government tenders over the past few months, with most tenders being delayed to 4Q16. RHB believes that this is mainly due to the global macro slowdown, as well as the state of the local economy.

"We expect the local Government to continue to invest heavily in healthcare projects in Singapore, but with a delayed timeline," it said.

RHB notes of several big project tenders opening up soon in the range of SGD40-100m with results for these tenders to be revealed by 1H17.

"Acromec has a proven track record with various Government organisations such as A-Star and National University of Singapore, which gives the company an advantage and underscores its creditability when tendering for these contracts. It also has the manpower and balance sheet to tender, as well as cope with large-sized projects," it said