As a building construction services player, Siab Holdings Bhd (SIAB) provides services covering various stages of a building construction project. Under a design and build project, SIAB designs the proposed building construction according to client’s requirements, proposed budget and implementation schedule. Also, SIAB participates in building construction and engineering services projects mainly as a main contractor or principal works contractor, where the group plays a central role for all its construction activities and coordinates with project consultants, subcontractors and nominated subcontractors to ensure smooth implementation of the contract. In order to complement its building construction services, SIAB is also capable of providing information and communication technology (ICT) solutions and services based on clients’ requirements.

Moving forward, SIAB intends to purchase land and construct storage facilities, invest and purchase new construction machinery and equipment to support expansion plans, besides expansion of its technical team. We derive a fair value of RM0.33 based on a c. 14x PE multiple to its FY22F EPS of 2.4sen. The IPO is expected to raise approximately RM36.7m from the issuance of 122.4m new shares. Apart from utilising 16.6% of the proceeds to purchase land and construct a storage facility, 35.7% and 25.3% of the proceeds are allocated for purchase of machinery and equipment as well as working capital, respectively.

• Growth drivers. SIAB’s growth will be dependent on: i) construction of storage facilities following purchase of land, ii) participation in tenders for higher value high-rise construction projects, iii) expansion into civil and engineering segments, iv) purchase of new construction machinery and equipment, v) expansion of its technical team, and vi) investment in building information modelling software.

• Competitive strengths. SIAB’s competitive strengths include: i) established track record in building construction segment, ii) qualified and experienced management and technical team, iii) commitment to quality construction works, safety and environment, together with iv) capabilities in carrying out wide variety of building construction.

• Catalysts. Key drivers may include: i) government-led initiatives and spending, provision of incentives as well as financing, ii) favourable interest rate environment, and iii) steady population growth.

• Key risks. Key downside risks, among others, include i) competition, ii) dependency on the supply of foreign workers, iii) dependency on services of subcontractors, iv) availability and fluctuations in construction material prices, v) possible delays in the completion of construction projects and potential reduction, termination and/or revision in the scope of work, and vi) exposure to delays in collection or non-recoverability of trade receivables.

Source: PublicInvest Research - 16 Feb 2022