SAC Research has started coverage on Soilbuild Construction : S7P 0% with a “buy” call and target price of S$0.04, following the mainboard-listed construction group’s profit turnaround for the second half of FY2023.
Analysts June Yap and Matthias Chan on Thursday (May 2) said that Soilbuild’s closing price of S$0.032 on the day was at a 5.5 times its price-to-earnings (PE) ratio, which compares “favourably” to the average 7.4 times PE ratio of its construction peers in Singapore.
In light of this, SAC initiated a “buy” rating on Soilbuild at S$0.04, which represents a 26.4 per cent upside from Thursday’s closing price.
Yap and Chan highlighted the group’s strong recovery as it “reaped the rewards of its labour” by quadrupling its net profit for H2 from the previous half year in FY2023.
They expect further recovery to be driven by growth in Singapore’s construction industry, Soilbuild’s growing order book, estimated to increase by 5 per cent from end-FY2023 to end-FY2024, and enhanced productivity driven by the company’s digital transformation initiatives.
The research house projects Soilbuild’s net profit margin to increase from 3 per cent in FY2023 to 3.1 per cent in FY2024 and 3.6 per cent in FY2025.
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Correspondingly, Yap and Chan expect the company’s dividend per share to increase to S$0.0014 in FY2024 and S$0.0016 in FY2025. This translates to an estimated dividend payout ratio of 24.1 per cent for both fiscal years, up from 18.2 per cent in FY2023.
Earlier this year, the group said its subsidiaries were awarded contracts with an aggregate value of about S$24.3 million on Jan 10, and about S$81 million on Apr 23.
Shares of Soilbuild were trading flat at S$0.033 as at 2 pm on May 7.
