We recently attended BBR Holdings latest AGM and below are some of our thoughts.
Tollymore Investment Partners 2Q20 Letter: ESG ≠ sustainable investing
Tollymore Investment Partners letter to investors for the second quarter ended June 30, 2020. Q2 2020 hedge fund letters, conferences and more Dear partners, Tollymore generated returns of +19% in the first six months of 2020, net of all fees and expenses. Investment results since inception are shown below: Tollymore's Raison Detre Tollymore is a Read More
Decline in Revenue
Despite a challenging FY2017 where we see a decline in revenue figures for BBR Holdings, margins have improved significantly from 5.05% to 15.1%. This is due to a better project mix of construction projects in FY2017 and better profit margin for a number of specialised engineering projects in Malaysia that were completed.
Decline in Order Book
One major concern was the lack of any new order book wins. The Company’s order book would be completed this year and this is one major concern to us. When we asked management what their thoughts was with regards to this, the CEO mentioned 2 key things:
- The industry is a lot more competitive now, where the Company has been tendering for new projects but has always been falling short versus their competitors. They tend to bid for the $200 million size tenders, which is an amount that the Company can handle comfortably.
- As projected by the Building and Construction Authority, the construction demand to be awarded this year will be in the range of $26.0 billion to $31.0 billion, up from the $24.5 billion awarded in 2017. The projected higher demand is due to an anticipated increase in the public sector construction demand, which is expected to grow from $15.5 billion recorded in 2017. The private sector’s construction sector demand is similarly expected to improve modestly from $9 billion to $10-12 billion, on the back of the strengthened overall economic outlook and the upturn in the property market sentiments.
Given the improving outlook, management hopes that they would be able to clinch some award wins going forward.
While, I do understand that the last few years has been a very tough market for the property and construction market in general, my take on the Company is that they are not competitive enough. However, we shall continue monitoring the Company’s progress this year. There are a total of 34 PPVC projects that are up for grabs this year, so hopefully, the Company would be able to clinch some new projects to replenish their order books.
The Company acquired Goh & Goh Building through a JV where the Company owns 62% interest in the project. Some of the latest updates on this are:
- Goh & Goh is to be a mixed development with both commercial and residential space.
- Due to the Government’s Master Plan, the initial design of 2 basement levels, 3 commercial levels and 17 residential levels is to be changed to 2 basement levels, 2 commercial levels and 17 residential levels.
- Also due to the Master Plan, the Government wants the Company to acquire the piece of land in front of the current project which is about 50% the size of their current project. As to the value of this piece of land, it is still in the midst of discussion. One thing that we can be sure of is that the piece of land would not be as cheap as when the Company acquired the Goh & Goh Building given how we see property prices all on the uptrend.
- The project would be directly connected to the MRT underground and this to us would be a good selling point when the Company markets the residential units.
Disclaimer: The author is personally vested in the above mentioned Company.
Article By Tee Leng Goh, Value-Edge