Its asset-light model and careful working-capital management enable disciplined expansion, says analyst
[SINGAPORE] KGI Securities has initiated coverage on Ever Glory United with an “outperform” rating and a target price of S$1.20, on the back of strong order book visibility and exposure to Singapore’s infrastructure supercycle.
Its development into a more “integrated platform” was observed via the group’s recent acquisitions of Fire-Guard Engineering in February 2024 and Guthrie Engineering in July this year.
Analyst Alyssa Tee believes the Guthrie Engineering transaction is a “significant milestone,” as it adds S$312 million to Ever Glory’s order book, and builds access to landmark projects previously beyond its reach.
Guthrie Engineering’s order book currently stands at around S$400 million, targeting about S$600 million by year-end, said Tee in a report on Wednesday (Dec 17).
“The combined entity now possesses the technical depth, licensing breadth and track record to compete for Singapore’s largest infrastructure tenders,” added the analyst.
Ever Glory’s order book, which is predominantly public sector-facing, also aligns itself directly with the policy-led pipeline in Singapore, she said.
Construction demand in the Republic is projected at S$47 billion to S$53 billion in 2025, driven by megaprojects including Changi Terminal 5, the Cross Island Line and 55,000 planned Build-To-Order launches from 2025 to 2027.
“With its order book now exceeding S$500 million post-Guthrie Engineering, and management targeting around S$700 million by year-end, revenue visibility extends through FY2027 to FY2028,” said the analyst.
Despite margin compression from the project mix, the engineering services company stays in a net cash position – maintaining positive operating cash flows and continued distributing dividends, including a S$0.005 interim dividend in 2024.
Its “asset-light model and careful working-capital management enable disciplined expansion” without overstretching the balance sheet, said Tee.
Ever Glory’s project credentials include Marina Bay Sands, Jewel Changi Airport and the Thomson-East Coast MRT line.
“We project (the group’s) FY2025 revenue to be around S$130 million, implying strong H2 2025 acceleration as Guthrie Engineering’s contracts flow through to revenue recognition.”
The Catalist-listed company proposed a transfer to the mainboard of the Singapore Exchange on Oct 14. As part of this move, the group made a public offer of up to two million new shares at an offer price of S$0.64 per share on Dec 9, reported The Business Times previously.
Ever Glory said it expects to raise net proceeds of about S$1.2 million, in the event the offer is fully subscribed, after S$130,000 in fees and related expenses are deducted. The funds will be used for working capital, said the company.
Property optionality adds upside
The group holds minority stakes in two joint developments – a residential joint venture in District 14 and an industrial project in Mandai.
“While these remain non-core (assets) today – representing less than 5 per cent of the group’s FY2024 revenue – they provide option value as the projects monetise,” said the analyst.
Management has also signalled appetite for selective property investments, she added.
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