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Author: Callmejholow   |   Latest post: Thu, 5 Sep 2019, 9:53 AM

 

Crest Builder's Q2 Results - to worry or not?

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I pick up an article from Mr Rondy on Stockbit on CREST BUILDER to share here.... and perhaps I shall provide some comments too below... I always enjoy writing on this counter (maybe because I do have some shares in here... but then I also own some stocks of GKENT, IJM, YINSON, MYEG, YTL and a couple others...mostly construction stocks.)

Feeling the pinch from property development division and will be highly dependant on construction division for the rest of 2019. 

1) Analysis 
Crest Builder Q2 2019 result is out and it's not a pretty sight. Revenue and Profit both decreases as CresBld's property division's lacklustre performance from Shah Alam Project completion and lack of sales leaves a big gap to fill in the bottom line. 

Totally agree with this - their report states - "For the second quarter under review, the Group’s revenue decreased from RM151.3 million to RM123.1 million while the profit before tax decreased from RM17.9 million to RM8.3 million respectively as compared to the corresponding second quarter of the preceding year." If you were to compare these quarterly results with their immediate peers, then you'll realize that most of the other construction counters all encounter a decrease or lower results for both revenue and profits... 

So... it is not so bad la if compare to others.... but then, still a cause for concern. 


2) Cause for concern 
Recall that in 2018, high margin from property division propels CRESBLD to achieve a record profit. However, this year, it seems that sales thus far on unsold units across Alam Sanjung, Residensi Hijauan, etc AND the continuous delay over the mega projects in Jalan Ampang & Kelana Jaya is hitting the bottom line. A quick search in iproperty or propertyguru on their completed projects shows alot of units available for sale. 

I called up my friend in Crest Builder - and she tells me that units at Residensi Hijauan has already hit 95% sales; in fact, as of this morning, it has already reached 100%, whereby that 5% balance are pending sales conversions and loan approvals... iProperty's listings are interesting - but I noticed they're mostly secondary market sales... 

Nonetheless... I think Crest Builder needs to beef up their land bank and do some new launches soon. My friend at Crest Builder tells me there is something cooking in the oven... but cant reveal anything to me though =( 

Those 2 mega projects at Jalan Ampang? Honestly I rather they dont do anything to it at the moment given the weak property market sentiments right now... Kelana Jaya should be an interesting one to see. 


3) Cause for optimism 
However, Construction division looks to be going good in terms of progression. Remember that Cresbld have HUGE construction order book which is unbilled. Uitm concession division also continue to generate revenue and cash flow which is slowly paring down the company's leverage level. 

 

Construction seems to be doing much better than before for them. In view of the weak property market, coupled with some interestingly inconsistent government decisions as well as funny U-turn stories - Crest is doing quite alright I guess. I take a look at their construction clients from their Instagram account - and I see many solid clientele in there, including GLCs like Sime Darby Property and Worldwide Holdings and solid and established developers like Desa ParkCity... they have a Taiwanese client too in their Capri Hotel project. 

THIS would be the plus point here... 


4) Personal thoughts 
The result does worry me personally, as I think if Cresbld is to depend solely on construction, bottom line margin is not good. I had hoped Cresbld to achieve around RM 55m of profit but that looks like a long shot now if its solely dependant on its construction division. 

Results... I do have my concerns too. But lets see the next quarter though.

Haha Mr Rondy... RM 55mil is rather farfetched right now. I think safer to look at the range of RM 30-35 mil.. basing on current share price, a PE of 6x seems fair.

5) Valuation 
If you are to annualise 1H 2019 result, you will get RM 30m profit or eps of RM 0.17. Today's closing price of RM 1.02, this imply a PE ratio of 6x, this is still lower than peer average of about 7-8x. 

I posted before on the PE valuations... back in May 2019.

At May numbers, Crest Builder trades at P/E of 2.6x. 

How about its peers?

ADVCON 15x

AZRB 17x

ECONBHD 40x

FAJAR 72x

GADANG 8x

GBGAQRS 11x

GDB 6.5x

IJM 18x

INTA 6.6x

KERJAYA 10x

MITRA 14x

MRCB 48x

PESONA 19x

SUNCON 18x

TRC 10x

VIZIONE 9x

WCT 12x

 

Lower than everyone? Almost.... even with current numbers PE 6x... still lower than most. 


6) Future Catalysts 
As we don't have info on sales progression in CrestBuilder's property development division, catalyst on share price will be mainly from 2 factors: 
a) Further job / contract wins from construction project. Recall, this year Cresbld thus far fails to replenish their orderbook to meet their internal target yet. If they win anything that relates to ECRL, Cresbld stock should get a massive boost. 
b) Progress on joint land development project in Kelana Jaya and Jalan Ampang - both expected to launch in 2020. Anything before that is a massive boost. 

The future catalysts remain to be how much they can replenish their orderbook honestly. They have only secured RM 100mil this year... and according to their management, they are targetting another Rm 500mil before end of the year. 

This replenishment would be the main numbers driver and catalyst.


7) BUY HOLD SELL? 
In my opinion, there might be a short term downward pressure on the stock price. Hopefully its relatively still cheap valuation & high dividend yield helps to cushion the fall. Management still sounds bullish on the company, and there are potential catalysts that can really boost the share price of the company. Personally I will HOLD majority of my positions in the counter for now, but maybe will trim more position ahead of Q3 result if no positive news til then. Good luck! 

Sometimes I really pity this counter. 

When the results shoot upwards... the performance goes unnoticed. 

 

One little hiccup like FY2019Q2 results... suddenly everyone want to panic. 

 

 

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CRESBLD 0.96 -0.01 (1.03%) 25,100 

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