Valuation Case Study on Sysma Holdings, Limited by Tay, Hock Meng

Transcription

1 Valuation Case Study on Sysma Holdings, Limited by Tay, Hock Meng 1

2 Disclaimer and Declaration The objective of the presentation is for educational purposes. The full content of the presentation is for illustration purposes only and should not be used as investment recommendations. AB Maximus and its presenters are not responsible for all investment activities conducted by the participants and cannot be held liable for any investment loss. The company and presenters may have personal interest in the particular shares presented. 2

3 Agenda 1 Company Background 2 Industry Overview 3 4 Valuation Risk 3

4 Company Background Sysma Holdings, Limited is a Catalist-listed stock since August 03, It is niche player in the design, and construction of Good Class Bungalows (GCB) in Singapore 4

5 Company Background Property development segment Established two subsidiaries, Sysma Land Pte. Ltd., and Sysma Properties Pte. Ltd. with the view of embarking into property development Proposed projects include two adjacent properties at Race Course Road. Plans currently to develop the properties into shops and residential units. 5 Source: Company s Annual Report 2012

6 Company Background Building and construction segment Have tendered and begun negotiations for several high-profile projects. Have secured a bungalow project at 5 th Avenue worth SGD 8.5 million. Facing challenges of rising building materials costs, but am confident of staying ahead of competition and managing overall costs well. 6 Source: Company s Annual Report 2012

7 Company Background Revenue by financial year (latest six months ending Jan 31, 2013) Revenue in SGD 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 0 $54.8M Revenue $39.5M $17.5M six months ending Jan 31, 2013 FY 2011 FY 2012 FY 2013 Financial year ending June 30 Revenue Source: Company s Annual Report

8 Under Construction Industry Overview Expected supply pipeline of private residential units expected to increase by approx percent in 2016 to 27.2 million units from 2013 figure of 10.4 million. 8 Source:

9 Valuation Methodology Discounted cash flow for the entire business, as property development and construction business segments are not segmented by the Company, and I believe that both segments form the bulk of the revenue generation from construction to final sales & marketing. Projected cash flows for five years, given that from the data indicating the pipeline of supply as of 2Q13, peak growth is expected to be during calendar year 2016; Terminal growth at year 6 is estimated at approx. 3.0 percent. 9

10 Valuation Property development and construction Upcoming Projects: Acquisition of two adjacent properties at Race Course Lane. Acquisition of De Parisdo Development Pte. Ltd., a Spore investment holding company, focusing on development of two plots of land located at Serangoon. 10

11 Valuation Profit / FCFF projection (FY ending June 30) $ mil E 2015E 2016E 2017E 2018E 2019T Revenue $30.5 $32.1 $34.3 $37.4 $39.3 $40.8 $42.1 NPAT $6.7 $7.0 $7.5 $8.2 $8.6 $8.9 FCFF $3.3 $3.4 $3.7 $4.0 $4.2 $4.4 NPV FCFF $3.1 $2.9 $2.8 $2.6 $2.4 $26.3 Company Data and own forecasts Assuming revenues growing each year starting from 2014E at 5.0 percent, peaking in 2016E at 9.0 percent, with terminal year in 2019T growing at 3.0 percent. Forecast assume peak growth will take place at approx. 2016E. 11

12 Valuation Risk Free Rate 3.1% Market Required Return 10.6% Beta (assuming small co. est.) 1.75 Cost of Equity (CAPM) 16.2% Cost of Debt 4.1% WACC 13.2% Small co. premium 3.0% 12

13 Valuation In $ M 2014E 2015E 2016E 2017E 2018E 2019T FCFF $3.4 $2.9 $2.8 $2.6 $2.4 $23.8 Terminal Value (FCFF 2018) $44.3 PV of FCFF $3.0 $2.9 $2.8 $2.6 $23.8 NPV $37.4 Minus Debt ($18.2) Add Cash $16.2 FCFF due to share holders $35.3 no. of shares (mil) 95.0 Fair Value per Share $

14 Valuation Final Valuation Fair value per share ($/share) using Equity FCFF method Fair value per share ($/share) using EV/EBITDA method $0.37 $0.35 Fair Value per share $0.36 Current market vale per share (Sept. 19, 2013) $

15 Valuation (P/E Comparison) Company P/E Fragrance Group Ltd. 13.9x Bukit Sembawang Estates Ltd. 7.4x Keong Hong Holdings Ltd. 4.5x Sysma Holdings Ltd. 11.1x Est. Forward EPS for Sysma Holdings $0.028 Fair Value of Sysma Holdings using P/E $0.31 Forward P/E compared to closest peer Fragrance looks relatively low, but relatively high against the rest. Overall, valuations look fairly valued for Sysma Holdings. Source: Bloomberg.com 15

16 Trading Data 52 Weeks Trading Range $ $0.56 Avg Volume (3 mths) Market Cap 0.5 mil $67.6 mil 16

17 Main Risks A cyclical property development industry vulnerable to external shocks, and Singapore Govt. housing policies. Declining popularity of Good Class Bungalows (GCB) might impact Sysma Holdings. Aggressive land sale prices might force Sysma Holdings to reduce its land bank, which leads to slow growth in future new launches. 17

18 Main Risks Default Risk Low (as of six months ending Jan 31, 2013) Current ratio = 2.4x Interest coverage = N/A D/E ratio = 1.2 Cash = $16.2 mil 18