BRC Asia - UOB Kay Hian 2022-12-02: FY22 Above Expectations, Record Year & Special Dividend

• BRC Asia reported posted record-high earnings of S$90.2m (+92% y-o-y), backed by higher delivery volumes and elevated steel prices. Gross and net margins also expanded as steel prices started to fall, leading to net reversal of provisions.
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• Maintain BUY recommendation on BRC Asia with a higher target price of S$2.42 (S$2.00 previously).

BRC Asia's FY22 Results surpassed expectations.

• BRC Asia (SGX:BEC) reported record-high FY22 revenue and net profit of S$1,699.3m (+45% y-o-y) and S$90.2m (+92% y-o-y) respectively, forming 94% and 115% of our full-year estimates, surpassing our expectations. Similar to 9MFY22, stronger delivery volumes coupled with elevated steel rebar prices boosted the group’s earnings.
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• Margin expansion. In line with higher revenue, BRC Asia's FY22 gross profit also grew 87% y-o-y while gross margins expanded 2.0ppt y-o-y. This is largely due to lower steel prices in 2HFY22 which led to a net reversal of provisions for onerous contracts at S$12.8m compared to a provision of S$45.3m in FY21.
• Moving forward, management noted that the group expects further reversal of provisions for onerous contracts as steel prices continue to fall, boosting margins.
• Resolute orderbook. BRC Asia’s orderbook remains robust, standing at S$1.4b, higher than the S$1.14b at end-3QFY22. We expect BRC Asia to deliver half of its current orderbook in the next 3-4 quarters as local construction activity ramps up.

Challenging operating environment ahead.

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Above is the excerpt from report by UOB Kay Hian Research.
Clients of UOB Kay Hian may be the first to access the full report in PDF @ https://www.utrade.com.sg/.