Ley Choon Group Holdings Limited – Net Profit Growth of 35.9%

Date of Report: 13 November 2024

Financial Year: First half-year ended 30 September 2024

Business Description

Ley Choon Group Holdings Limited is a Singapore-based investment holding company with operations primarily in the construction sector. The core business operations include:

• Underground utilities infrastructure construction and maintenance services, such as laying water pipes, NEWater pipes, high-pressure gas pipes, high-voltage power cables, fiber optic cables, and sewer pipeline rehabilitation.
• Road and airfield pavement construction and maintenance services, including supplying and laying graded stones, cement treated base, and milling and laying of asphalt premix.
• Construction materials supply services, which include the production of asphalt premix and recycled aggregates from construction and demolition waste.

The company primarily operates in Singapore with a minor presence in Sri Lanka.

Industry Position and Competitors

Ley Choon Group Holdings Limited operates in the competitive construction industry. The company focuses on infrastructure and public sector projects, where it competes with other major construction firms. The company’s market share is reinforced by its specialized services in underground infrastructure and utilities construction.

Revenue Streams and Customer Base

The company’s revenue streams are diversified across its three main business segments:

• Pipes & Roads: The largest segment contributing the majority of revenue.
• Construction Materials: Sales of asphalt premix and recycled aggregates.
• Others: Rental of motor vehicles and machinery.

The company’s customer base is primarily in the public sector, driven by infrastructure projects and government contracts.

Financial Statement Analysis

Income Statement

For the first half of 2024, the company reported a revenue of S\$64.4 million, a 2.5% increase from the same period in 2023. The gross profit for the period was S\$13.3 million, with a gross profit margin of 20.6%, up from 16.3% in the previous year. The net profit after tax was S\$7.3 million, marking a 35.9% increase from S\$5.4 million in the previous year.

Balance Sheet

The company’s total assets as of 30 September 2024 stood at S\$87.7 million, a slight decrease from S\$89.8 million as of 31 March 2024. Non-current assets saw a reduction mainly due to depreciation and disposals. Current assets remained stable, with notable movements in contract assets and trade receivables.

Equity attributable to shareholders increased to S\$63.6 million from S\$60.2 million, and total liabilities decreased to S\$24.2 million from S\$29.5 million.

Cash Flow Statement

Net cash generated from operating activities was S\$1.2 million, down from S\$10.8 million in the previous year. Net cash used in investing activities was S\$0.3 million, and net cash used in financing activities was S\$6.8 million, primarily due to dividend payments and lease liabilities repayment.

Key Findings

• Net Profit Growth: The company reported a significant net profit growth of 35.9%.
• Stable Revenue: Revenue increased marginally by 2.5%, indicating steady business operations.
• Dividend Payment: The company paid a dividend of S\$4.066 million during the period.
• Reduced Liabilities: Total liabilities decreased, improving the company’s financial stability.

Investment Recommendations

For Current Shareholders:

Given the company’s positive financial performance, significant net profit growth, and reduced liabilities, it is recommended to hold onto the stock. The company’s strong position in the growing construction sector, particularly in public sector projects, presents a favorable outlook.

For Potential Investors:

Considering the company’s steady revenue growth, significant improvement in net profit, and strong market position, it is advisable to consider investing in the stock. The company’s strategic focus on high-margin projects and efficient execution of ongoing projects underscores its potential for future profitability.

Disclaimer

This recommendation is based on the financial report for the first half-year ended 30 September 2024 and is subject to market conditions and other external factors. Investors should conduct their own due diligence before making any investment decisions.