Company profile
Raffles Interior is a Singaporean interior decoration service provider founded in 1986. According to the Frost & Sullivan report, based on 2018 earnings, the company is the third largest participant in the Singapore interior decoration market. The company's main clients include owners or tenants of commercial and light industrial properties in Singapore, building contractors and professional consultants. At present, the company has completed 125 interior decoration projects in Singapore, with an average contract value of about 2 million Singapore dollars.
Sino-Thai views
The future growth of the building improvement industry in Singapore will be moderate: from 2019 to 2023, the compound annual growth rate of available space in the commercial and industrial sectors was 5.2%, according to Statistics Singapore. Furthermore, according to the Bureau of Construction, private and public construction projects will continue to increase in the future, and the market demand for residential, commercial and industrial construction projects will be strong. In the future, with ongoing urban renewal and government policy support to promote home improvement and shorten the refurbishment cycle of commercial properties, it is expected that the Singapore interior decoration market will be boosted to reach 5.23 billion Singapore dollars in 2023, with a compound annual growth rate of about 5.7% from 2019 to 2023.
In terms of operating performance: In the 2017-2019 fiscal year, the company's operating revenue was 71.78 million Singapore dollars, 81.17 million Singapore dollars, and 76.66 million Singapore dollars respectively, with revenue from the five major customers accounting for about 43.3%, 51.0% and 49.0%; gross margin declined 21.3%, 18.9%, and 20.7% respectively. The gross margin declined in 2018 due to the fact that the company subcontracted more MEP projects to subcontractors; the materials purchased mainly included glass, tiles, marble, etc., accounting for the same period, respectively. Sales costs were about 10.5%, 8.9% and 9.1%; net interest rates were 11.0%, 7.9%, and 6.1% respectively. The decline in the past two years was due to non-recurring listing expenses; project bid rates were 27.2%, 34.1% and 32.3%, respectively.
In terms of valuation: Based on the global share capital of 1 billion after the public sale, the company's market value is HK$5-650 million, which is lower than the Hong Kong stock market average. The price-earnings ratio of the company in 2019 was about 19.9-25.9 times, higher than the industry average; the net price-earnings ratio was about 3.33-3.61 times, higher than the industry average. In terms of profitability, ROE and ROA in 2019 were 37.4% and 10.4% respectively, which is higher than the industry average. The sponsor's 19-year track record rose 1 level. Furthermore, the first-day performance of the Singaporean construction industry was mixed in recent years. We gave it 52 points and rated it “no subscription”.
Risk warning: (1) market competition risk, (2) impact of project bid rate, (3) high concentration of the five major customers