KSH Holdings - my reasons for buying this stock

KSH Holdings first caught my attention after I read that it had obtained a Letter of Acceptance (LOA) for Qbay. Its order book now stands at more than $460 million, so there is visibility on its performance for the next 1-2 years. It has also been constantly paying dividends over the years to shareholders, with yield of 3.4% at closing price of S$0.44. PE ratio is relatively low at 8.5, which means that the stock is not overpriced. I also noted that its earnings over the years have been pretty consistent.

Initially, I was a little skeptical of construction stocks, as I feared that construction activities in Singapore is getting rather saturated due to boom in construction activities in recent years, and I had the impression that population growth in Singapore was going to be carefully controlled/curbed due to public sentiments post-General Elections. However, that changed after the White Paper came out, which projected that Singapore would have a population of 6.9 million in 2030. My feelings on this aside, I saw this information as an indicator that construction in Singapore is going to flourish for some years.

My entry price was S$0.38, which was still below its NAV of S$0.39. It's last closing price is S$0.44, which means a gain of 15% in less than a month.

There's a buy call from OCBC, revising its TP from S$0.50 to S$0.62.

Excerpt here (from http://sgx.i3investor.com/servlets/ptres/3848.jsp):

KSH Holdings: Another quarter of strong growth

KSH reported 3Q FY13 PATMI of S$8.1m, which surged 179% YoY mostly due to contributions from its property development segment as the group recognized earnings from The Boutiq, Cityscape@Farrer Park and Rezi 26. 9M FY13 earnings now cumulate to S$22.3m, up 108.3% YoY and forming 73% of our FY13 forecast. The group has sold a significant portion of launched projects, and we expect progress billings from already sold projects to underpin earnings growth ahead. Maintain BUYwith an increased fair value estimate of S$0.62, versus S$0.50 previously, as we lower the RNAV discount for its property segment from 50% to 40% to reflect a lower risk profile given a larger percentage of projects sold, and raise our PE multiple for its construction segment from 3.0x to 4.0x - a level closer in line with that of its peers. (Eli Lee)

The full report can be obtained from here: http://kshholdings.listedcompany.com/misc/KSH-130208-OIR.pdf

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