BBR Holdings

[freedom]

was waiting for dydx's update on this one.

Maybe I will start first.

Seems the construction projects lift its revenue, but also raised the receivables a lot. The receivables is a concern for cash flow. property development seems okay, at least compared to popular holdings.

Joint venture cost overrun, is it the project related to national heritage board?

Dividend is as low as usual.

[dydx]

FY13 (ended 31Dec13) AR makes interesting reading…..
http://infopub.sgx.com/FileOpen/BBR%20An...leID=20830

BBR remains one of the few very well-established local Specialised Engineering and General Construction groups with a solid operating track record. BBR's high-quality has attracted even fellow local construction companies (some may even compete with BBR) - e.g. Tiong Woon, Ryobi-Kiso, Shanghai Tunnel Engineering (all listed under the 20 largest shareholders) - as shareholders.

Going forward, BBR should be booking the bulk of the development profits of the already substantially sold 140-unit Bliss @Kovan freehold condo project (TOP: expected by Dec2015) in FY14 and FY15. Together the 3 established business divisions should be able to deliver a conservative total NP of some $20.0m a year (FY13: $21.8m), which will give an EPS of some $0.065 (FY13: $0.0713) a year.

Against the 31Dec13's NAV/share of $0.4098, the last done share price of $0.265 (cum a $0.008/share FY13's Final dividend) is quite obviously not giving enough justice to BBR. If we take a 2-year view on the group's businesses, BBR's NAV/share could well hit in excess of $0.50 by 31Dec15 even after accounting for the expected yearly dividends. Would Mr Market be prepared to do its usual trick?

[ksir]

A rather curious observation from AR 2013 on S$413.8M National Gallery project.
The losses recognized by JV:
FY2012: S$4M
FY2013: S$78M
BBR has 25% in this JV.
BBR supposed losses to be $78M x 25% = about $20M.
BBR recognized $4M losses.
The reason is probably due to below:
"Pursuant to the terms of the JV agreement, the Group’s liability is capped at $5,000,000, although it has an obligation for up to 25% of losses in the project."

Wondering will there be further implication?

[dydx]

A rather curious observation from AR 2013 on S$413.8M National Gallery project.
The losses recognized by JV:
FY2012: S$4M
FY2013: S$78M
BBR has 25% in this JV.
BBR supposed losses to be $78M x 25% = about $20M.
BBR recognized $4M losses.
The reason is probably due to below:
"Pursuant to the terms of the JV agreement, the Group’s liability is capped at $5,000,000, although it has an obligation for up to 25% of losses in the project."

Wondering will there be further implication?

From hindsight, the extent of the losses shows how technically difficult is the underlying project - especially the subterranean or underground portion, in which Yongnam is also heavily involved as a sub-contractor - and how gung-ho is the Japanese main-contractor Takenaka in bidding for and taking up the job. It also shows that BBR management is both conservative and smart - and lucky too! - in having negotiated with Takenaka a max. cap for any potential losses in their JV agreement for the project.

[ksir]

It is indeed worrying, the phenomena of Japs & Korean companies bidding project with almost no margin of safety. Cmiiw, BBR is also subcontractor of this project (doing specialized engineering & general cons works). Hence I am wondering the extend of the losses might be wider (or further).

[ksir]

Let me try to estimate the remaining "weight" of Bliss@Kovan:
Bliss@Kovan completion in FY2013:
28% - 5% = 23%.
Revenue recognized in FY2013: S$41M.

Total Project Revenue (estimate):
41M/0.23= S$178M

Remaining Revenue:
77% X 178M = S$137M.
TOP expected on 31 Dec 2015.
Revenue estimated in FY2014 & FY2015:
137M/2 = S$68M @ (each year)

PBT in FY2013: 10M-4.8M = S$5.2M
PATMI (estimate): S$4M
Net Margin: 10%.

PATMI Estimated in FY2014 & FY2015:
68M X 10% = S$6.8M @
Per Share = 6.8/307 = S$0.022 @

CMIIW, the data are mined solely from AR2013.
The fault in estimations are sorely mine.

Note: Waiting to be pleasantly surprised by the upsides.

[vested]

Apart from sharing the good news of a substantial contract win, yesterday's announcement also shed light on another company, Swee Hong Limited (SGX.QF6) with its (licensed) unitized building technology.

At one quick glance from the financial reports, Swee Hong Ltd doesn't look attractive to me:

- Low earnings visibility, with relatively small order book
- Not yet profitable, seems struggling with admin overheads, perhaps overall not yet getting enough scale from their work
- Might be cash-stretched, also with some other committments like building a dorm business

Yet - valuations are rich, with market cap of SGD110m. Compared to BBR at about SGD90m. At least, this helps to show the relative better value of BBR as a business, IMO.

I wonder if there is more to this relationship between BBR and Swee Hong. With Swee Hong owning this technology, it could also means that other companies might also be able to use and benefit from this technology, not just BBR.

Any VB care to share another view?

[ksir]

Apart from sharing the good news of a substantial contract win, yesterday's announcement also shed light on another company, Swee Hong Limited (SGX.QF6) with its (licensed) unitized building technology.

At one quick glance from the financial reports, Swee Hong Ltd doesn't look attractive to me:

- Low earnings visibility, with relatively small order book
- Not yet profitable, seems struggling with admin overheads, perhaps overall not yet getting enough scale from their work
- Might be cash-stretched, also with some other committments like building a dorm business

Yet - valuations are rich, with market cap of SGD110m. Compared to BBR at about SGD90m. At least, this helps to show the relative better value of BBR as a business, IMO.

I wonder if there is more to this relationship between BBR and Swee Hong. With Swee Hong owning this technology, it could also means that other companies might also be able to use and benefit from this technology, not just BBR.

Any VB care to share another view?

I was fascinated as well that I looked up for Swee Hong.
The technology is not owned by them btw, it is licensed by Aussie co.
Not sure if the technology itself is an IP (hence the competitive advantage).
In any case, their latest set of results (especially deteriorating BS), discourage me from looking further.

Back to BBR, I don't have much expectation of the NTU project contribution to bottom line.
If I'd to speculate, I'd say the project might be too costly due to PPVC.
Hence it is more for Track Record than making money (if any).
Note: the similar was said by the management (on casual agm makan session) about National Gallery project (lost money).

On PPVC, as mentioned by Andrew that it is more expensive currently due to the lack of scale. Being the pilot project to do so in Singapore, it might be costly, but might be better in longer term.

(Vested)

[vested]

Thanks ksir for the insight and view! Hopefully the SGD196m contract value would be buffered enough to get at least some margins out of it, don't think BBR can afford any more National Gallery style overruns which effectively offset the gains from the Nassim development at that time.

My layman guesstimate - Compared to Chip Eng Seng's SGD165m June announced HDB contract for 1,222 units in 8 blocks - this SGD196m for 1,582 units in 6 blocks of high density (small) hostel rooms and amenities seems still reasonable - hopefully not too far off!

Apart from sharing the good news of a substantial contract win, yesterday's announcement also shed light on another company, Swee Hong Limited (SGX.QF6) with its (licensed) unitized building technology.

At one quick glance from the financial reports, Swee Hong Ltd doesn't look attractive to me:

- Low earnings visibility, with relatively small order book
- Not yet profitable, seems struggling with admin overheads, perhaps overall not yet getting enough scale from their work
- Might be cash-stretched, also with some other committments like building a dorm business

Yet - valuations are rich, with market cap of SGD110m. Compared to BBR at about SGD90m. At least, this helps to show the relative better value of BBR as a business, IMO.

I wonder if there is more to this relationship between BBR and Swee Hong. With Swee Hong owning this technology, it could also means that other companies might also be able to use and benefit from this technology, not just BBR.

Any VB care to share another view?

I was fascinated as well that I looked up for Swee Hong.
The technology is not owned by them btw, it is licensed by Aussie co.
Not sure if the technology itself is an IP (hence the competitive advantage).
In any case, their latest set of results (especially deteriorating BS), discourage me from looking further.

Back to BBR, I don't have much expectation of the NTU project contribution to bottom line.
If I'd to speculate, I'd say the project might be too costly due to PPVC.
Hence it is more for Track Record than making money (if any).
Note: the similar was said by the management (on casual agm makan session) about National Gallery project (lost money).

On PPVC, as mentioned by Andrew that it is more expensive currently due to the lack of scale. Being the pilot project to do so in Singapore, it might be costly, but might be better in longer term.

(Vested)

[dydx]

BBR has divested its entire 25% stake in associated company FOSTA Pte Ltd for a total cash consideration of $2.38m…..
http://infopub.sgx.com/FileOpen/Disposal...eID=305402

Against the original cost of investment of only $125k (obtained from p49 of BBR's latest FY13 AR), BBR has done very well in this investment.