BBR Holdings

(13-11-2014, 07:22 PM)GFG Wrote: FY14Q3 results are not good.
Again BBR had to book in losses for some of the projects
It's only barely profitable because of the 2 divestments
Without that, it'll b awash in red.

Somehow BBR tends to get losses in some projects from time to time
I suspect it's cos the margins factored in is pretty low, so once something crops up there's no leeway in terms of cost projections
Perhaps in their desire to secure more and more projects, they competed too heavily on price.
This is definitely a negative to consider for BBR
Management has a problem controlling profitability of individual projects. Losses from time to time is to b expected

Indeed, low margin is definitely a big challenge to BBR (especially the General Construction Unit).
With declining Specialized Engineering revenue, there isn't much (if any) room for error.

I definitely hope the divestments were just coincidence and not well-timed.
The Q3 Releases focusing on higher revenue and not enough acknowledgement or explanation on cost overrun problem does worry me greatly.

I highly suspect the cost overruns were due to transition to higher workers levies for low margin projects won in the past.
Hence the inability to pass on the higher cost.

The question is, is it contained? Are we going to get more surprises?
It might be wise from capital allocation perspective to buy back shares ($0.28) when the NAV is $0.439 (with about 35% in cash).

Vested & curiously reviewing the Managements

(13-11-2014, 09:53 PM)ksir Wrote:

(13-11-2014, 07:22 PM)GFG Wrote: FY14Q3 results are not good.
Again BBR had to book in losses for some of the projects
It's only barely profitable because of the 2 divestments
Without that, it'll b awash in red.

Somehow BBR tends to get losses in some projects from time to time
I suspect it's cos the margins factored in is pretty low, so once something crops up there's no leeway in terms of cost projections
Perhaps in their desire to secure more and more projects, they competed too heavily on price.
This is definitely a negative to consider for BBR
Management has a problem controlling profitability of individual projects. Losses from time to time is to b expected

Indeed, low margin is definitely a big challenge to BBR (especially the General Construction Unit).
With declining Specialized Engineering revenue, there isn't much (if any) room for error.

I definitely hope the divestments were just coincidence and not well-timed.
The Q3 Releases focusing on higher revenue and not enough acknowledgement or explanation on cost overrun problem does worry me greatly.

I highly suspect the cost overruns were due to transition to higher workers levies for low margin projects won in the past.
Hence the inability to pass on the higher cost.

The question is, is it contained? Are we going to get more surprises?
It might be wise from capital allocation perspective to buy back shares ($0.28) when the NAV is $0.439 (with about 35% in cash).

Vested & curiously reviewing the Managements

I don't believe it's a coincidence.
I think the losses are recognized this quarter so that the divestment gains can mask the losses. They did mention that in addition to "cost overruns", some of the subcon they used did a poor job or had difficulty finishing projects on time so they had to incur additional costs to complete them.
My question is, won't BBR use the same subcon? After so many projects, surely they would have a core group that they have been working with and are reliable?
I too, agree that more discussion should have been done on the losses. What's the point of flaunting a big rev increase when the costs are greater than the increased revenue?
I did a comparison with similar peers and BBR has the lowest margins of all.

(Vested)

Yeap, they can't solve the problem by "ignoring" it and focusing on higher revenue. If the projects are already in cost overrun mode, the more revenue, the worse, no?
The handling of this is getting into my nerves. They mentioned that it was also due to delayed prefabricated works by their subcon.

I didn't get down to buying this share as I saw heavy selling pressure....

The recent report doesn't inspire much confidence.

Indeed, the way the announcement was made is indeed disappointing - quite contrary to their clear and transparent style over the past few years. Not sure if everything is under control or there might be more surprises in the next quarter.

Sold down my holdings to realise a small gain that is barely worth the few years staying vested, didn't think it was worth the risk to wait out to find out in Q4 to see if the value story remained intact.

Trust is really hard to gain an easy to lose!

(and today's announcement of $200m MTN programme also doesn't look positive to me, debt and low margins doesn't go well - unless they have something good up their sleeves to create value! will be watching from the sidelines on this..)

(13-11-2014, 10:36 PM)vested Wrote: Indeed, the way the announcement was made is indeed disappointing - quite contrary to their clear and transparent style over the past few years. Not sure if everything is under control or there might be more surprises in the next quarter.

Sold down my holdings to realise a small gain that is barely worth the few years staying vested, didn't think it was worth the risk to wait out to find out in Q4 to see if the value story remained intact.

Trust is really hard to gain an easy to lose!

(and today's announcement of $200m MTN programme also doesn't look positive to me, debt and low margins doesn't go well - unless they have something good up their sleeves to create value! will be watching from the sidelines on this..)

Although I agree with most of the stated views here, I actually added to my holdings yesterday and today at 0.27-0.275
My opinion is that the bad news is out in this quarter and there are no more surprises for q4
Even though it's a disappointing quarter, the overall valuations are still compelling
Qualitatively, I have quite a bit of experience with companies in this sector and I am optimistic the competitive advantage is still intact

The other project I will be monitoring is the NTU one
Being one of the earliest to utilize PPVC is not easy
I think that project too will incur cost issues. I think management is willing to take losses to "learn" in certain projects, like in this case, where PPVC is utilized.
Whether they can capitalize on their 1st mover advantage in the long run is the key though

The PPVC project is indeed interesting. They engaged Swee Hong as PPVC contractor for NTU project, won on 1 July. But until 2nd Oct, the contract with Swee Hong still being negotiated. 3 months gone by without work in progress?? Can meet the deadline or delay (cost)?
OTOH, on 10 Sep, they acquired the other PPVC contractor, Moderna Homes. What is going on with the past BBR's good & clear communication?

maybe the $200m notes is to fund the solar business? That is a highly capex intensive business as BBR needs to install, maintain and own the solar panels. They get revenue from the power sold (but the rates are capped).

More info needs to be provided if this is a good deal from ROE perspective.

(divested after the dismayed Q3. Learn a lesson regarding unpredictably of project-based businesses)

(13-11-2014, 11:35 PM)ksir Wrote: The PPVC project is indeed interesting. They engaged Swee Hong as PPVC contractor for NTU project, won on 1 July. But until 2nd Oct, the contract with Swee Hong still being negotiated. 3 months gone by without work in progress?? Can meet the deadline or delay (cost)?
OTOH, on 10 Sep, they acquired the other PPVC contractor, Moderna Homes. What is going on with the past BBR's good & clear communication?

It is very hard to utilise PPVC, there is a steep learning curve.
Although the "pros" of using PPVC are always cited, the truth is, these more "productive" methods actually add costs and are difficult to control.
For eg. PPVC may reduce the actual site construction, reduce amount of noise, building time etc, the main problems are fabricating the units offsite (this requires know how), subsequent storage (requires space), and transportation (additional costs).
Of these factors, transporation is the one that adds the most cost as it's not easy to transport the "units"
BBR indicated as much in their initial release. The tone gave me the impression this NTU project is done more for bragging rights, and for the initial learning process, and to set up a certain protocol after getting the experience. There will likely be minimal profit from this project, just hoping we don't end up paying too much "school fees" for this.
Other companies like Hock Lian Seng have way way way higher margins than BBR, although admittedly with smaller order books. Wonder why cant BBR compete and protect their margins. Perhaps its management's strategy to do more projects (mass), instead of trying to do a few projects but get higher margins for these
What is more surprising is that BBR claims to have an international network of expertise, and they should be able to leverage on this better to get fatter margins. Otherwise, whats the point of this network

Yes, the $200m notes probably is to fund the solar business.

http://www.hdb.gov.sg/fi10/fi10296p.nsf/...enDocument

The First HDB Solar Leasing Project in Singapore was a 2 MW system which cost $10.9 million was awarded to Sunseap Enterprises Pte Ltd of which $3.28m was paid upfront by the HDB. A highly capex intensive business indeed.

Read more: http://www.pv-magazine.com/news/details/...z3J0GltoLM

(13-11-2014, 11:53 PM)namralk Wrote: maybe the $200m notes is to fund the solar business? That is a highly capex intensive business as BBR needs to install, maintain and own the solar panels. They get revenue from the power sold (but the rates are capped).

More info needs to be provided if this is a good deal from ROE perspective.

(divested after the dismayed Q3. Learn a lesson regarding unpredictably of project-based businesses)