CSC 1H08 Results digest - 9 Nov 07

CSC released its stunning 1H08 results (end sep 08) due to robust construction demand in singapore. Here are the highlights.

1H08 Financials:

- Rev: 185m vs 56m or 230% up
- Gross profit margin 21.6% (40m/185m) vs 15.4% (8.3m/54m)
- Net profit margin 10.8% (20m/185m) vs 9% (5m/54m)
- np: 19m vs 5m or 280% up
- eps: 1.71cts vs 0.49cts or 249% up
- nav: 9.7cts (as of 30/09/07)
- shares: 1,119,217,635 as of 30/09/07

FY07 results:

- FY07 (at 31/03/07 out 24/05/07):
- Rev: $127m (+18%)
- Net profit: $8.6m (+128%)
- EPS=$0.0086 (+126%)
- Shares as at 31/03/07: 1,112,391,951

FY06 results:

-FY06 ( 31/03/06): EPS=$0.0038



Biz highlights:

- gross margin improved from 15% to 22%.
- strong contribution from new sub, L&M, G-pile and soil investigation
- beside marina & Sentosa IR projects, larger projects won in 1H08 are Lonza Biologics bio-reactor plant, Invista Ammonia Plant, public housing, school construction, private residential projects, infra project MRT Downtown Line extension.
- acquired additional plant and machinery excess$20m in 1H08
- involved in strategic initiatives to embark project in m'sia, vietnam, middle east.
- currently actively tendering for projects in m'sia.
- Acquired 60% Kok Tong Group in Oct 07.
- current order books $304m.
- first time dividend payout $0.00282 (from S44A tax credit).
- mgt expect to perform better in 2H08.

Evaluaion:

- at current $0.35, it is trading at historical FY07 PE 40x (FY07 EPS $0.0086).

- this year high at 0.495, ie, trading at FY07 PE 58x.

CASE 1
- 1H08 EPS 0.0171, assuming FY08 EPS 0.03 (75% increased, not very demanding as it is in the view that results in 2H08 will be another record breaking due to the high contributions from the 2 IRs and other major projects).

- so at current price 0.35, it is trading at FY08 PE 12x (ie 0.35/0.03)

- if trading at PE 30, stock price will be at $0.03 x 30 = $ 0.90 (reasonable expectation)

- if trading at PE 40, stock price will be $0.03 x 40 = $ 1.2 (moderate expectation)

- if trading at PE 58, stock price will be at $0.03 x 58 = $ 1.74 (rosy expectation)


CASE 2
From another view, say if FY08 EPS 0.03 is to achieve, meaning full year 2008 net profit will be $0.03 x 1,119,217,635 = $33.6m or 2H08 $14.6m (33.6m - 19m). 2H08 net profit $14.6m unrealistically low. So estimated FY08 EPS $0.03 could be under-estimated.

So lets work out the FY08 EPS from its earnings.
- 1H08 net profit $19m.
- take a conservative view, say same earnings for the 2H08 ie, another 19m (highly achievable!).
- so FY08 net profit $19m+$19m = $38m,
- FY08 EPS = 38m/1,119,217,635 = $0.034.

- so at current price 0.35, it is trading at FY08 PE 10.3x (ie 0.35/0.034)

- if trading at PE 30x, stock price will be at $0.034 x 30 = $ 1.02 (reasonable expectation)

- if trading at PE 40x, stock price will be $0.034 x 40 = $ 1.36 (moderate expectation)

- if trading at PE 58x, stock price will be at $0.034 x 58 = $ 1.972 (rosy expectation)



Conclusion:

- With the very good start 1H08 results and expecting even better results in the next 6-12 months, especially we can expect at least 90% contribution from the $294m Sands IR project into FY08 (have to be completed by feb-april 2008 & FY08 ends in March). CSC share price to reach at $1.0 range is something not impossible!!