Company overview
The company is mainly engaged in providing labor dispatch and supporting services to construction and construction contractors in Singapore, as well as dormitory services for foreign workers, information technology services and construction supporting services (including warehousing, cleaning, building maintenance, etc.).
In labor dispatch and supporting services, the company provides scaffolding installation, welding and other construction services for construction and construction contractors by recruiting, hiring and training foreign workers from Bangladesh and India. At present, the company employs a total of 1380 foreign employees available for dispatch. In addition, the company operates two workers' dormitories with a capacity of 1500 and 479 respectively to accommodate foreign workers employed by the company and third parties with an occupancy rate of nearly 100 per cent. In 2016, the company's revenue from labor dispatch and supporting services and dormitory services accounted for 84.3% and 12.1%, respectively.
The company's operating income from 2014 to 2016 was S $45.1,46.1 and S $45.1 million, respectively. Net profit was S $4.2,6.3 and S $6.6 million respectively, with CAGR 25.4%, mainly due to a decrease in non-recurrent expenditure. 2017 income and net profit for the first four months were S $15.0 and S $1.5m respectively, up 2.4 per cent and-41.9 per cent year-on-year, mainly affected by S $1.2m listing expenses. Excluding listing expenses, pre-tax profit rose 5.0 per cent.
Industry status and prospects
According to the Ipsos research report, the market size of Singapore's construction industry in 2016 is S $26.1 billion, which is expected to rise to 35 billion CAGR by 2021, thanks to growth in public sector construction demand. However, due to the aging population, foreign workers have become the main source of labor in Singapore's construction industry. In addition, construction and construction contractors are more likely to use labor dispatch services for cost reasons.
In the Singapore market, six and eight companies are the main competitors in the labor dispatch industry and the dormitory service industry for foreign construction workers. But the market share and ranking are unknown.
Advantages and opportunities
Rich experience in labor dispatch service industry and management of foreign workers
Ensure the source of quality workers through internal training
Benefit from the potential growth of the industry and the social demand for labor.
Weakness and risk
Changes in Singapore government's regulatory policy on foreign workers may incur additional costs
The rental cost of dormitory continues to rise.
Automate construction in the construction industry or reduce the demand for manpower.
Valuation
The IPO price is 16.7 times 2016's fully diluted price-to-earnings ratio, slightly higher than Hong Kong-listed engineering services companies (6-13 times). The company did not give a profit forecast for fiscal 2017 in its prospectus. The unrecognised portion of HK $11.2m of listing expenses is expected to be reflected in the income statement one after another. Due to undergrowth in earnings and high valuation, we give IPO a dedicated rating of "4".
