Kori Holdings (KHLL SP) BUY

Share Price S$0.43

Target Price S$0.60

Upside +39.5%

Company Description

Kori Holdings provides civil/structural

engineering and infrastructural construction

services as a sub-contractor for commercial,

industrial and public infrastructural construction

projects.

GICS sector Industrials

Bloomberg ticker: KHLL SP

Shares issued (m): 99.2

Market cap (S$m): 42.7

Market cap (US$m): 33.7

3-mth avg t'over (US$m): 0.1

Underground Specialist

Valuation/Recommendation



on 5.5x 2014F PE.

local construction scene. Its strategic relationships with both foreign

and local contractors have ensured consistent contract wins. With an

established track record and the upcoming railway lines fully

underground, Kori has surfaced as one of the major beneficiaries in

Singapore’s construction boom. Valuation is underpinned by a strong

net cash of 14 cents/share (or 32.5% of market cap).Initiate coverage with a BUY and target price of S$0.60, basedKori is an emerging underground specialist in the

Investment Highlights



main contractors, Kori has an impressive contract wins for all three

stages of the DTL. With plans to apply for a higher category

accreditation from the Singapore Structural Steel Society, this may

increase Kori’s chances of award wins and boost its earnings.Established track record. Through its strategic relationships with



announced works on a master plan for underground space. With the

Eastern Region Line (ERL) and the Thomson Line (TSL) already

expected to be completely underground, we believe the growing

interest in underground infrastructure will boost tunneling services’

earnings. As one of Singapore’s few tunnel boring specialists, Kori’s

tunneling services’ revenue and gross profit grew at a 3-year (2009-

12) CAGR of 32.9% and 17.7% respectively.A growing niche. In Jan 12, the Ministry of National Development



IPO, Kori’s net cash improved to 14 cents/share (or 32.5% of its

market cap) as at 31 Dec 12. Despite the absence of a dividend

policy, a strong free cash flow and earnings (2012: EPS of S$0.08)

make Kori more than capable to pay out generous dividends without

jeopardising future growth. Based on our conservative 25% dividend

payout forecast for 2013, this will translate to an attractive dividend

yield of 5.4%.Solid fundamentals. With the huge cash proceeds from its recent



industry, b) an increase in the foreign worker’s levy, and c) steel

pricesKey risks include: a) the reliance on Singapore’s construction

Price Chart

Source: Bloomberg

Analyst

Loke Chunying

+65 6590 6637

cyloke@uobkayhian.com

Key Financials

Year to 31 Dec (S$m) 2011 2012 2013F 2014F 2015F

Net turnover 34.7 52.9 64.1 74.8 87.4

EBITDA 7.2 9.9 11.5 13.7 15.8

Operating profit 7.1 9.8 11.1 13.1 15.3

Net profit (rep./act.) 6.0 7.9 9.2 10.8 12.7

EPS (cent) 924.5 7.9 9.3 10.9 12.8

PE (x) - 5.4 4.6 3.9 3.4

P/B (x) - 1.2 1.0 0.9 0.7

Dividend yield (%) - - 5.4 6.3 7.5

Net margin (%) 17.3 14.9 14.4 14.5 14.6

Net debt/(cash) to equity (%) (26.2) (40.6) (31.3) (33.2) (34.4)

Interest cover (x) net cash net cash net cash net cash net cash

ROE (%) 28.7 22.5 22.0 21.6 21.4

Source: Kori, Bloomberg, UOB Kay Hian