EPS tumbled by more than 30% and yet Yongnam's share price stayed resilient today.
2.17c (2007)
2.79c (2008)
3.27c (2009)
5.06c (2011)
3.45c (2012)
Buying in when I did at 24.5c a share in February 2012 a year ago, it was at a PER of 3.7x, using EPS of 5.06c from the year 2011. A PER of 3.7x is pretty cheap.
Paying 24.5c a share was also approximately at a P/BV ratio of 1.04x. Yongnam's assets are a strong reason why it has a durable competitive advantage. To amass the volume and type of productive assets like Yongnam's is not an easy feat. So, paying slightly more than book value is, I believe, more than reasonable.
Although in the longer term, Yongnam is likely to benefit from Singapore government's commitment to build a more extensive MRT network through 2030, its near term performance could be lacklustre. This might or might not be reflected in its share price.At 28c a share, PER is now 8.12x. Although not expensive, it is not cheap either.
Anyone buying into Yongnam now is buying into a strong belief that much better days are ahead for the company. Indeed, with its strong track record over the years, there is no reason to believe otherwise.
Technically, however, it is obvious that 29.5c is the immediate resistance and the selling pressure could be quite strong if it should be tested again.
"Outlook for the construction industry both in Singapore and the region remains positive as governments step up on infrastructural spending for projects like roads, railways and airports.
"Yongnam’s strong competitive advantage in the Structural Steelworks and Specialist Civil Engineering infrastructural works is expected to support the Group’s active pursuit of approximately S$1.3 billion worth of new projects in Singapore, Hong Kong, Malaysia, India, Indonesia and the Middle East."
See slide presentation: here.
See news release: here.
Related post:
Yongnam: Broke resistance! 29.5c tested.
Hi AK,
ReplyDeleteI recalled many years ago, as Yongnam took off with the bulls, and when the priced reached 50cts, someone declared "no eighty no sell!". I will always remember those exuberating times - the rest, they say is history ;)
Dear sir... May I know why does a company has so much married deals of it's shares?? Looking at courts Asia, where the past few wks has seen such deals...
ReplyDeleteHi Ivan,
ReplyDeleteReally? 80c? That would mean a PER of 20 to 30x and with almost no dividend yield to speak of. Heavenly bullishness!
Now that valuations are more earthly, there is less interest in the stock? ;)
Hi Xw,
ReplyDeleteMarried deals? I guess you would have to ask the parties which got married for the reason. :)
Hi AK,
ReplyDeleteHave managed to clear my Yongnam earlier when it is at 28 cents and 28.5 cents.
Given current result and not so cheap valuation, i just stay flat for this counter.
What is your thought on King Wan seem to have good order book that provide business till 2015 and trading at historial dividend yield of >5% (without taking into consideration of special dividend from sales of two thai associates)
Some analyst forecast 3 cents dividend for next few years which is a yield of >10% at 29 cents
Regards
Yee
Hi Yee,
ReplyDeleteI did divest partially at 27.5c earlier and that was due to the belief that my portfolio was too heavy in the stock.
Currently, at 8x PER based on last year's EPS, the stock seems fairly valued. Its balance sheet is strong and cash flow is good. Income has come down quite a bit and the question to ask is whether it would continue to decline.
I thought for a while whether to reduce exposure further but decided to stay invested as the company is fundamentally strong and poised to benefit from an almost certain slew of government contracts for the foreseeable future.
For now, I will be happy to have the company pay me while I wait.
Of course, there might still come a time when I feel that it is more prudent to divest than to stay invested.
As for King Wan, I do not have any knowledge of this company. I might take a look at it later as currently I lack the inclination.
You seem to be an experienced investor and I am sure you will take in the facts presented by the analysts and subject their opinions and forecasts to greater scrutiny.
Thanks for the heads up. :)
2013 to remain a decent year for Yongnam. With Yongnam’s niche
ReplyDeletein the specialist civil engineering market, we expect the group to directly benefit from the Singapore government’s plan to double the island’s railway connection to 360 km by 2030.
Yongnam has already won several MRT Downtown line contracts and as such, we expect it to be in an advantageous position for future contracts.
Shortage of labor, additional levies on foreign labor and more competition from foreign contractors, however, will continue to be concerns and may keep a lid on margins.
We maintain our 2013 net profit estimate of SGD50.1 mln, driven by the Marina Coastal Expressway, MRT Downtown lines and the National Sports Hub contracts.
We also introduce our 2014 net profit forecast of SGD55.7 mln (+11% YoY), which is expected to be secured through SGD1.3 bln in potential new projects that Yongnam is pursuing in 2013.
Standard & Poor's, 27 Feb 13.
Our target price is raised as we roll-over to FY14 (still at 6x P/E, its 3-year mean). We maintain Outperform as the group is poised to land some mega accretive projects.
ReplyDeleteApart from its wind turbine
foundations work in Europe,
Yongnam is part of a consortium that will be bidding to build and operate a new international airport in Myanmar. We understand that the tender closes in late April amid keen competition, but given the renowned reputation of the partners in the consortium, they stand a good chance of winning the contract.
OUTPERFORM. TP: 36c.
CIMB, 26 Feb 2013.
Hi AK71,
ReplyDeleteis the big float of any concern to you? that is to say the directors within the company not having a significant shareholding or anyone for that matter.
THank you very much AK71.
Hi tostubi,
ReplyDeleteI believe the Seow family owns some 13% of the company's stock. That is quite significant. :)