<Results First Take> On track to deliver robust performance with the return of foreign labour
- 3Q22 net profit of $20.4 m and 9M22 net profit of $60.2 m is in line with expectations, making up 25% and 75% of our full year estimates respectively
- 3Q22 orderbook improved to a robust S$1.135 bn, higher than the S$1.0 bn recorded in 1H22 and S$1.1 bn in 3Q21
- Improvement in foreign labour supply, higher construction spend to drive BRC’s FY22 revenue by 47% and net profit by 70%
- Maintain BUY with unchanged TP of S$2.40
3Q22 Results Highlight
| S$m | 9M22 | 9M21 | 3Q22 | 2Q22 | 3Q21 | Variance YoY (%)9M22 vs 9M21 | Variance YoY (%)3Q22 vs 3Q21 | Variance QoQ (%)3Q22 vs 2Q22 |
| Revenue | 1,308.7 | 832.9 | 515.3 | 435.9 | 340.2 | +57.1% | +51.5% | +18.2% |
| Gross profit | 105.5 | 57.4 | 36.7 | 42.5 | 17.8 | +83.8% | +106.7 | -13.5% |
| Profit after tax | 60.2 | 29.3 | 20.4 | 26.5 | 10.2 | +105.2% | +100.0% | -23.2% |
| Gross Margin | 8.1% | 6.9% | 7.1% | 9.7% | 5.2% | |||
| Net margin | 4.6% | 3.5% | 4.0% | 6.1% | 3.0% |
Source: Company, DBS Bank
3Q22 revenue of $515.3 million grew 51% yoy on the back of construction recovery. BRC’s 3Q22 revenue of S$515.3million is 51.5% higher yoy and 18.2% higher qoq. BRC benefited from the recovery of the construction sector as foreign labour supply improves.
3Q22 net profit of $20.4 million remains in line with expectations, making up 25% of our full year estimates. 3Q22’s net profit is 100% higher yoy but 23.2% lower qoq. BRC’s 3Q22 gross margin came in a 7.1%, lower than 8.7% in 1H22. Our checks indicate that gross margins are lower as there was no significant reversal of provision of onerous contracts whereas 1H22 recorded a net reversal of provision for onerous contracts of S$1.8 million.
3Q orderbook improved to a robust S$1.135 billion from S$1.0 billion at end 1H22. With a strong demand for infrastructure projects and high public housing demand, the construction industry output is expected to hit $29-32 billion in 2022. We think that BRC will be well poised to benefit from construction recovery as it leverages its dominant market share of 60-70%.
Outlook
More growth to come as construction activities pick up with the return of foreign labour. According to the Ministry of Trade and Industry, the construction sector recorded 3.8% growth yoy in c2Q22 (vs 1.8% in c1Q22) on the back of foreign labour supply recovery. However, labour shortages persist and the value-added of the construction sector remained 23.7% below its pre-pandemic level (vs 25.3% in C1Q22). We are expecting BRC’s revenue to grow 47% on strong order deliveries as labour supply improves to spur construction activities.
Higher construction spend to drive BRC’s revenue by 47%. In the first five months of 2022, the total construction spend was S$11,490 million compared to $10,390 million for the same period last year. We note that the construction spend still managed to grow by 10.6% despite the soaring dengue cases and higher workplace facilities that resulted in stop-work orders within the industry. Going forward, we think that the easing of labour constraints will enable construction companies to clear backlogs, translating to an increase in construction spend. This should lead to a greater demand for BRC’s steel reinforcement solutions, which are integral in concrete construction.
Source: Building and Construction Authority, DBS Bank