Key Highlights of the Management Meeting with Benalec Holdings

Key Highlights of the Management Meeting with Benalec Holdings

Commendable construction margin from its unique business model. Benalec is a niche player in construction industry which specialises in marine construction works. Besides, Benalec is also a ‘land manufacturer’ as it actively seeking for new buyers following its land reclamation projects. Thus, the Group is able to achieve significantly higher PBT margin of 40-50% (against sector average of 8-10% for civil works) mainly contributed by higher marine construction earnings and land sales.

Dominance in marine construction works. As of to date, the Group is the second largest player in this segment with market share of 17.9%. As an integrated marine construction specialist, Benalec also own a comprehensive range of vessel as well as undertaking ship repair services to enable the company to bid for any project with a distinct cost advantage. Hence, it could leverage its chances to clinch for more sizeable and high profile projects in future such as E&O’s Seri Tanjung Pinang Phase 2.

Potential land sales from land reclamation works in Malacca. Malacca government approved total of approximately 2,400 acres (across Kuala Sg. Linggi and Sg. Merlimau) land reclamation activities in year 2008. To date, reclamation work had done on 1,500 acres of the land leaving another 900 acres still in progress which turn out to be contract sum of RM588m to be booked as construction revenue. Furthermore, Benalec currently holds about 230 acres in its land inventory which is ready for sale with potential sales value of RM281m (current market value of RM28psf). We understand that some local and Singaporean developers has approached the Group for the strategic landbank.

Catalyst from the recent secured Pengerang and Tanjung Piai projects. Benalec has secured the rights to reclaim and own the land in Pengerang and Tanjung Piai measuring 1,760 acres and 3,485 acres respectively from the Johor government with potential GDV of RM3b and RM4b which could provide earnings visibility of over 10-15 years. Meanwhile, the company has entered into a MoU with Singapore-based Rotary Engineering Ltd to jointly develop an independent deepwater storage terminal for oil product in Tanjung Piai, Johor. The proposed terminal would have an initial storage capacity of 1 million cubic metre (cbm), with subsequent phases to increase capacity to 3 million cbm on the total reclaimed land area of 250 acres. The reclamation work is expected to start in July 2012.

Sturdy balance sheet. The company is having low net gearing of 0.14 times and positive net operating cash flow up to date. Thus, we believe the company might not embark on any cash call from the shareholders for its on-going and up-coming projects.

Positive earning outlook for FY2012-13. We estimate that Benalec could easily achieve net earnings of RM110 million (on the back of RM240m revenue) for FY2012 which is in line with consensus earnings. For FY13F, we forecast the Group to double its revenue to RM473m with net earnings of RM170m.

Undemanding valuation. Benalec is currently trades at 7.1x consensus FY13F PER. Our fair value for Benalec (non-rated) is RM1.90 which is derived at 10x consensus 2013F PER. However, we reckon that valuation based on sum-of-parts could render the higher fair value mainly contributed by the revaluation of Benalec’s landbank in Malacca.

Company Background
Benalec Sdn Bhd was incorporated in 1978 as a contracting company specialized in undertaking civil engineering projects. Benalec has in a short span of time emerged as one of Malaysia’s own top-notch homegrown integrated marine construction and transportation specialists. The company expertises in marine construction such as dredging & land reclamation, marine piling & marine bore pile, breakwater construction, rock revetment work, marine structures (port, jetty & offshore structures) and shipment. Nevertheless, the company also involved in doing infrastructure work, earth work, drainage, building construction and piling works.

good read.....something to ponder when market opens....

kppl80 wrote:good read.....something to ponder when market opens.... [You must be registered and logged in to see this image.]

ah..u can become hlk replacement to put news article here sure u get rep..i give u first [You must be registered and logged in to see this image.]

maxims wrote:

kppl80 wrote:good read.....something to ponder when market opens.... [You must be registered and logged in to see this image.]

ah..u can become hlk replacement to put news article here sure u get rep..i give u first [You must be registered and logged in to see this image.]

was reading cals news la sifu....thanks anyway...u can also give reps to cals....

ya ho give cal already then should i deduct ur rep kpp? [You must be registered and logged in to see this image.]

maxims wrote:ya ho give cal already then should i deduct ur rep kpp? [You must be registered and logged in to see this image.]

no need la....be generous this morning....

thanks sifu