Tiong Seng Holdings Ltd. – Value Analysis (SINGAPORE:BFI) : December 27, 2017

Capitalcube gives Tiong Seng Holdings Ltd. a score of 41.

Our analysis is based on comparing Tiong Seng Holdings Ltd. with the following peers – Tee International Limited, Lian Beng Group Ltd, Wee Hur Holdings Ltd., Chip Eng Seng Corporation Ltd., United Engineers Ltd., Hock Lian Seng Holdings Limited, BBR Holdings (S) Ltd, Boom Logistics Ltd, Koh Brothers Group Limited and Golden Energy & Resources Limited (M1Z-SG, L03-SG, E3B-SG, C29-SG, U04-SG, J2T-SG, KJ5-SG, BOL-AU, K75-SG and AUE-SG).

Investment Outlook

Tiong Seng Holdings Ltd. has a fundamental score of 41 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • BFI-SG has traded publicly for a relatively short period.
  • It’s current Price/Book of 0.54 is about median in its peer group.
  • We classify BFI-SG as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • BFI-SG has relatively low net profit margins while its asset efficiency is relatively high.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • BFI-SG‘s return on assets has improved from below median to about median among its peers over the last five years.
  • The company’s relatively low gross and pre-tax margins suggest a non-differentiated product portfolio and not much control on operating costs relative to peers.
  • While BFI-SG‘s revenue growth in recent years has been above the peer median, the stock’s P/E ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company’s relatively low level of capital investment and below peer median returns on capital suggest that the company is in maintenance mode.
  • BFI-SG might have enough interest coverage to take-on additional debt prudently.

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Leverage & Liquidity

BFI-SG might have enough interest coverage to take-on additional debt.

  • While BFI-SG‘s debt to enterprise ratio of 52.82% is on the high side compared to an overall benchmark of 25% (Note: The peer median is currently 61.60%), it also enjoys a relatively high interest coverage level of 5.00x which may give the company enough financial strength to support additional debt. Thus, the company is classified as having Some Capacity to raise more debt.
  • All 10 peers for the company have an outstanding debt balance.

BFI-SG has maintained its Some Capacity profile from the recent year-end.

  • BFI-SG‘s interest coverage is upward trending but is still within one standard deviation below its five-year average interest coverage of 7.54x.
  • The increase in its interest coverage to 5.00x from 4.35x (in 2016) was also accompanied by an increase in its peer median during this period to 4.03x from 2.87x.
  • Interest coverage fell 0.50 points relative to peers.
  • BFI-SG‘s debt-EV is its lowest relative to the last five years and compares to a high of 78.16% in 2015.
  • The decrease in its debt-EV to 52.82% from 72.31% (in 2016) was also accompanied by a decrease in its peer median during this period to 61.60% from 67.17%.
  • Relative to peers, debt-EV fell 13.91 percentage points (and is now lower than its peer median).

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Tee International Limited 66.08 1.57 0.59 3.05
Lian Beng Group Ltd 73.33 1.19 4.03 13.93
Wee Hur Holdings Ltd. 74.91 1.33 9.78 3.88
Chip Eng Seng Corporation Ltd. 100.8 5.73 2.64 1.59
United Engineers Ltd. 34.49 1.87 2.59 6.62
Hock Lian Seng Holdings Limited 15.76 2.14 57.85 310.54
BBR Holdings (S) Ltd 72.91 3.12 26.66 2.9
Boom Logistics Ltd 52.56 1.48 1.16 15.16
Koh Brothers Group Limited 61.6 1.11 -3.6 -2.31
Golden Energy & Resources Limited 6.3 2.37 4.51 187.97
Tiong Seng Holdings Limited 52.82 1.33 5 39.07
Peer Median 61.6 1.57 4.03 6.62
Best In Class 6.3 5.73 57.85 310.54

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Company Profile

Tiong Seng Holdings Ltd. engages in building construction, civil engineering and property development. It operates through the following business segments: Construction, Property Development, Rental and Sales of Goods. The Construction segment engages in construction projects and provision of construction services to property developers in both private and public sectors. The Property Development segment relates to development and sales of properties. The Rental segment refers to investment properties and plant and machinery. The Sales of Goods segment engages in the sale of construction patented Cobiax technology. The company was founded by Pek Ah Tuan, Pay Seng Koon, Lee Tuan Chay and Khng Kwi Cher in 1959 and is headquartered in Singapore.

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