Chuan Holdings Ltd (1420.HK)

[frus]

Chuan Holdings Ltd  is essentially a Singapore company (90%+ of its revenues derived from SG) but was listed in Hong Kong earlier this year (510 times oversubscribed) and is now down 46% and is starting to look interesting in my opinions (good CF generation and net-cash company). It's majority-owned (~70%) by the founder - Lim Kui Teng.

As per the last H1 report, the company is showing good growth (EPS from 0.68 to 0.83 YoY):

http://www.hkexnews.hk/listedco/listcone...905043.pdf

Is anyone looking at this name? Any thoughts or observations?

[karlmarx]

Based on the quarterly you shared, the financials look good. But looking at its valuation, it seems fair based on its last traded price which give it a p/e of 13.2 and p/b of 1.09. Most of the time, typical earthworks/construction companies in SG trade at p/e of 8 and p/b of not more than 1 (usually at a discount).

Most of its cash ($26/35 mil) is raised from the ipo and will be spent on expansion-related items ($2mil on software...?). as such, i will treat this cash as ppe.

This may be interesting if the price halves again.

[frus]

Based on the quarterly you shared, the financials look good. But looking at its valuation, it seems fair based on its last traded price which give it a p/e of 13.2 and p/b of 1.09. Most of the time, typical earthworks/construction companies in SG trade at p/e of 8 and p/b of not more than 1 (usually at a discount).

Most of its cash ($26/35 mil) is raised from the ipo and will be spent on expansion-related items ($2mil on software...?). as such, i will treat this cash as ppe.

This may be interesting if the price halves again.

I am not aware of any other listed earthworks companies listed here, but within construction, my (limited) sample shows 1x p/b being the floor rather than the average:

Hock Lian Seng 0.9x p/b 6.4x p/e
Transit-Mixed Concrete 1.7x & 11.3x
ISOTEAM 2.0x & 12x

Chuan Lim generated over 9m SGD in FCF in 2015, which amounts to a FCF yield of 10%. It also generated over 10m in FCF i H1 2016 alone. Unless the industry gets hit by something big, this company should remain very profitable.

Also, assuming that all cash (35m) gets spent on Capex is unrealistic. An acquisition maybe, but this not just CAPEX money (capex was <2m in H1 2016). Part of the reason why this company is cheap is that it hasn't told us what it will do with this extra cash (maybe nothing) or stated a clear dividend policy.

[CY09]

There is a company dealing with earthworks on the SGX - Huationg Global.

Its current valued at about 6x P/E, generates about 2 x P/FCF and P/B of 0.4. Only difference is its a net debt company with negative NCAV.
Huationg Global is involved with the earthworks for the construction of Changi Airport Terminal 5.

<no longer vested in Huationg>