King Wan reveals S$167m orderbook

A good fruit of three years' labour.

According to a release, King Wan reported 3Q13 results, which were generally in line with expectations. The SGD167m order book is equivalent to three years' work, supporting the core 1.5¢ dividend. We continue to expect special dividends of 1.5¢ from the sale of the Thai Associates over the next 10 years, raising the yield to 9.7% for the next 10 years. TP of SGD0.40 maintained based on 7.5% yield.

Revenue fell 25%, GPM soared from 22% to 31%. Core revenues fell to SGD11.0m from SGD14.7m, but gross margin jumped 9ppt to 31% as work was performed on higher-margin private residential projects. Gross profits rose 5%. Other costs and income were generally in line with expectations.

Bottom line falls 75% due to sale of Thai Associates, but beat expectations. The bottom line fell 75% to SGD1.7m as about SGD2.5m of Thai Associate income are no longer equity-accounted after their sale to KTIS in Thailand for a massive gain equivalent to about 2.5 years of core KWAN profits. We are raising our FY13F core earnings forecast by 5% to SGD6.0m.

Three years of order book supports 1.5¢ core dividend. Maintain expectations for another 1.5¢ special dividend, raising sustainable yield to 9.7%. The outstanding order book of SGD166.7m is equivalent to three years’ work, which supports our core dividend expectation of 1.5¢. We continue to expect special dividends over the next 10 years from the sale of the Thai Associates, which doubles the dividend to a juicy 9.7% yield sustainable for the next 10 years.

Near term catalysts in March and May. We see near term catalysts in the form of the lodging of the KTIS Prospectus likely in March, and the declaration of the special dividend on the full-year results in May.