Sunday, September 16, 2012

Cash Laden with Catalyst

Lian Beng Group's results for the financial year ended 31 May 2012 were impressive. Its EPS rose to 9.8 cents from 9.1 cents. This was on the back of increasing its net profit margin from 9.6% to 11.6% yoy.

It also increased its dividend by 25% to 2 cents per share, from 1.6 cents. This outperformed our expectation of a base case dividend of 4.1%. Hence, investors who joined the register in February would be enjoying a yield of 5.3%. This hearty payout hardly makes a dent on its huge cash pile - approximately 40% of its current market capitalization is net cash!

Its construction order book of over $650 million remains full and is expected to keep the group busy until 2015. With the property and infrastructure projects still on track, Chairman Ong Pang Aik is keen to enhance share holder value further. In fact, Pang Aik's hard work thus far was recognised after being bestowed the award of "Best CEO" at the 2012 Singapore Corporate Awards (organised by The Business Times and supported by Singapore Exchange). The award was an affirmation of his leadership strategy, vision, execution abilities and the firm's corporate governance.

Since our call in February 2012 when it traded at S$0.39 a share, Lian Beng has only moved up marginally by 8% to S$0.42. In the near term, we expect LBG to trade at least to book value of S$0.44 a share. Further upside would come when it spins off the engineering and machinery division on the Taiwan Stock Exchange.



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