My previous post on Crest Builder came out on one of the top articles here on i3investor.
So, here's a quick recap on the previous 10 pointers that I mentioned.
1. CREST BUILDER HOLDINGS BERHAD has a long history; being around for over 36 years and was listed 16 years ago in 2003 via a RTO of MGR Corporation Berhad. It has 4 primary core divisions - construction, property development, property investment as well as concession.
2. CREST BUILDER is family-run by the Yong Family - whereby the Group Managing Director is Mr Eric Yong. It also has Selangor royalty related Tengku Dato Sulaiman as its chairman.
3. The Q1 FY2019 results that was announced on 29th March 2019 showed that the revenue increased from RM124.3 million to RM163.8 million while the profit before tax increased from RM12.5 million to RM16.7 million respectively as compared to the corresponding first quarter of the preceding year. The construction division recorded revenue of RM101.8 million and profit before tax of RM1.7 million as compared to the corresponding first quarter of the preceding year of RM66.3 million and RM1.5 million respectively. The increase in revenue and profit before tax were mainly due to higher progressive construction progress recognised from certain projects during the financial period under review. The property development division’s revenue and profit before tax amounted to RM48.4 million and RM13.5 million as compared to the corresponding first quarter of the preceding year of RM42.4 million and RM8.0 million respectively. The increase in revenue and profit before tax were mainly due to higher sales generated from a completed development project.
4. Quarter on Quarter Comparisons showed the revenue has been on a uptrend every quarter, give or take a few one off higher ones (Q3 FY18). And then take a look at the Q1 results from the last few years, it has been on an uptrend - from a RM 5.28m PBT, to RM 9.9m, to RM 12.4m til yesterday, RM 16.741m.
If you take into account of the quarter results of most of its peers in the construction sector... you will find this that the EPS for the FY19 quarter vs the same quarter of FY18 as below... most of them show a lower Y-o-Y quarter results...
5253 = 1.63 vs 1.77
7047 = -2.21 vs 1.51
9261 = 2.01 vs 3.82
5398 = 7.02 vs 8.60
5226 = 2.31 vs 3.54
0198 = 1.13 vs 1.30
9571 = -0.48 vs 2.79
9598 = 3.0 vs 3.9
5263 = 2.4 vs 2.77
With an exception of a few good ones... like IJM (6.64 vs 0.31), INTA (1.12 vs 0.76), PESONA (0.46 vs 0.43), TRC (2.71 vs 0.31)... and on CRESBLD... 6 vs 4.5.
5. Crest Builder has been doing a lot of share buyback. A LOT of it. They're like top 10 in share buyback for the whole Bursa.
6. Crest Builder has a book value of RM 2.96. At current trading prices, it is trading at a ridiculously low P/B ratio of 0.35.
In comparison, IJM trades at 0.53 P/B, SUNCON at 4.14 P/B, TRC at 0.73...
7. They have a RM 1.1bil outstanding unbilled order book.
Their largest clients are big boy developers such as Sime Darby Property and Desa ParkCity.
They have an annual order book replenishment target of about RM 500 mil per year. Last year, they secured RM 600+ mil, and so far this year they have secured RM 100mil.
8. Dividends. Not that good. But very stable. And consistent.
Nope, they are not doing an Air Asia. No 90 cent pay out. But they're still paying out 4.5 cents in dividends this year. Quite decent for a construction counter.
9. Recurring Income
If you compare Crest Builder to its more similar peers such as INTA, GDB, ADVANCECON, MITRAJAYA... you will see that Crest has a steady stream of recurring income.
Crest owns two investment properties - the Crest at 3 Two Square (I think that is where their office is) and Tierra Crest, in Petaling Jaya. Both properties are considered to be matured properties already, probably due for some upgrading and renovation. According to their Annual Report 2018, the investment holding division reported a revenue of RM15.9 million and I think this is a plus point to the financials.
Crest also owns a concession business - a 23 year UiTM concession. Under this concession, the MOE pays them RM 43.5mil every year and a profit of about RM 10 mil every year.
10. Gearing Ratio Improving
If you look at Crest's gearing, it is rather high. I asked my friends in Crest Builder this question - and was told this was due to the financing for the UiTM project whereby they took a RM 500 mil sukuk as well as the long term loans secured against its investment properties.
Well, I think this sounds totally logical. I guess if you were to remove these long term finances, their gearing could be as low, or lower than its closest peers.
SO THOSE WERE THE PART 1 OF THE STRONG POINTS OF CREST BUILDER.
LETS GO TO THE MORE NOT-SO-OBVIOUS ONES. ONES THAT HAS A LOT MORE POTENTIAL IN BRINGING AND PUSHING THE COMPANY TO HIGHER LEVELS.... and obviously, higher share prices haha.
A. Let us look at Price/Earnings ratio. P/E ratio.
At current prices, Crest Builder trades at P/E of 2.6x.
How about its peers?
ADVCON 15x
AZRB 17x
ECONBHD 40x
FAJAR 72x
GADANG 8x
GBGAQRS 11x
GDB 6.5x
IJM 18x
INTA 6.6x
KERJAYA 10x
MITRA 14x
MRCB 48x
PESONA 19x
SUNCON 18x
TRC 10x
VIZIONE 9x
WCT 12x
So is this the CHEAPEST CONSTRUCTION COUNTER ON BURSA?
If u take the average of the 17 counters I mentioned, the average is 19.6. Lets say we remove the sky highs (FAJAR, MRCB, ECON), the average would still be 12x.
Lets do a bit of discounting here.
Industry average 12x.
Crest does not do infrastructure projects (such as IJM, TRC, MITRA) -2
Crest is not linked with mega projects (such as GAMUDA, IJM, SUNCON) -2
Crest has no direct/indirect links with the current government (such as IJM, VIZIONE) -2
TAKING THESE -2-2-2 = the expected P/E for CRESBLD should be 6.
Assuming Crest trades at 6x, the PRICE SHOULD BE almost RM 2.50!
Lets throw in some further discounts, perhaps Crest should trade at 4x.
EVEN AT 4x, THE PRICE SHOULD BE IN THE RANGE OF RM 1.60, and not 1.06.
B. Lets look at some of their projects...
Specifically, their mega property development projects coming up.
For a company that has a market cap of less than RM 200 mil, they do have quite some mega property projects coming soon.
They have the developments rights to the redevelopment of the Dang Wangi LRT Station as well as the Kelana Jaya LRT station, and also the MRB land opposite GE Mall. The estimated GDV for these projects combined is about RM 3.5-4 bil if I am not mistaken.
While normal developments would probably make a margin of 15-30%, these joint ventures perhaps anywhere between 10-20%. So lets take 15% in between.
Crest would be able to profit between RM 500-600 mil from these projects. Assuming we take a linear split, say over 10 years, this would make up RM 60 mil per year for the next 10 years.
Question mark... When will the developments take place?
I read that the Dang Wangi project is undergoing some design changes and would probably only commence towards end of the year or next year. For the other 2 projects, no status update could be found online so far.
C. Potential New Income Stream
According to news reports, Crest is pushing for a new income stream under their M&E division. I think this one has a lot of potential - the jobs are smaller, but the margins are way better. It has a subsidiary called CB Tech (M) Sdn Bhd - whereby its core specialties are in the field of Air Conditioning and Mechanical Ventilation, Electrical, Firefighting, Cold Water and Plumbing as well as Gas.
CB Tech has a China client in China State Construction for the Media City project. I wonder if CB Tech is a regular for China State - because China State Construction has so many projects all over the country. CB Tech potentially would benefit from this.
D. Interesting Institutional Shareholders
I managed to extract this information from its October 2018 corporate presentation.
And then extracting information from the Annual Report 2018, I noticed the following shareholders.
DBS Bank Ltd
Great Eastern Life Assurance (Malaysia) Berhad
Public Smallcap Fund
Public Strategic Smallcap Fund
Public Ittikal Sequel Fund
Not that many, but they do have a good set of institutional shareholders.
Amongst the list, I also noticed one interesting individual with a familiar name - Mr Lim Han Weng who holds almost 2% of Crest shares. I believe this Mr Lim Han Weng, is the same billionaire Lim Han Weng - ranked no.35 on the Forbes list in Malaysia. Owner of YINSON Holdings.
These large insurance funds, institutional funds as well as prudent and prominent billionaire believe in the counter - and I think it carries a very strong point here.
E. Assets List
Similar to point 9 above, I wish to highlight on a their asset list.
Based on Annual Report 2018, they have a couple of interesting assets in the list of properties.
Tierra Crest is valued at RM 158 mil.
The Crest is valued at RM 105 mil.
The Crest car parks valued at RM 16.5 mil.
Avenue Crest retail and car parks valued at RM 31 mil.
The rest are some random shops and offices.
Take the assets above, you'll find that it totals up to over RM 300 mil in assets.
What is their market cap now? Yes, less than RM 200 mil, with over RM 300 mil in assets. If you want to buy value at a discount, Crest Builder would be a very good buy. In fact, I would recommend this 'option' to avid investors out there - those who wish to buy out Crest's assets of RM 300 mil, you can take over the company at less than RM 200 mil and own over RM 300 mil of properties.
Value? Definitely.
I think these 5 points, A,B,C,D and E are already very good. But then I think we should commend the management team too.
F. Key management Profile
Turns out I did sight another Yong on the profile, not on the Directors, but a Yong Tiok Nee who is Head of Construction Solutions and Property Management. A Melbourne graduate in Property and Construction. Still quite young, but already the head since 2015. The CEO is Mr Teh Hock Hua - a UM first class graduate, and a Crest Builder loyalist. The Annual Report stated he joined Crest Builder in 1998 (same year of graduation) and worked his way up and was appointed as CEO in 2017. Then, they have a registered Professional Engineer in Ir Dr Siew Woh Hon who heads the M&E Division. Not sure when he joined, but I supposed he could be the main reason Crest has been securing M&E contracts. Then theres a Mr Sze To Paul (Paui or Paul) Khay who has been COO since 2017 for Property Division.
The Board of Directors have been quite the same since its listing in 2003, except Mr Eric Yong who was appointed since 2008 and Mr Lim Boon Teng who was appointed in 2017.
Considered quite the old timers I would say - not because they are old, but because there are many loyal people in the Group based on its management. Nowadays, CEOs and COOs are all on contract basis, and usually dont last beyond 3 years.
Okay, I think that would be all for now.
As of now, Mr Eric Yong still havent approved me as a friend yet on Facebook - but I have messaged him personally already and I do hope he will see this and approve me soon. I have so many questions! One of my sifu Mr H has been very supportive of this counter since I started following him, and I realized why now... it has so much potential.
The main problem on this is that it does not have enough liquidity - not enough buyers, and not enough sellers.
Coverage has been quite mediocre - so far this year I only see one report from Rakuten.
So far, I dont have enough information to come up with Part 3 - but if I am able to communicate with the reps of Crest Builder, I think I can write more.
Selamat Hari Raya Aidilfitri and happy holidays!
https://klse.i3investor.com/blogs/callmejholow/208958.jsp
So, here's a quick recap on the previous 10 pointers that I mentioned.
1. CREST BUILDER HOLDINGS BERHAD has a long history; being around for over 36 years and was listed 16 years ago in 2003 via a RTO of MGR Corporation Berhad. It has 4 primary core divisions - construction, property development, property investment as well as concession.
2. CREST BUILDER is family-run by the Yong Family - whereby the Group Managing Director is Mr Eric Yong. It also has Selangor royalty related Tengku Dato Sulaiman as its chairman.
3. The Q1 FY2019 results that was announced on 29th March 2019 showed that the revenue increased from RM124.3 million to RM163.8 million while the profit before tax increased from RM12.5 million to RM16.7 million respectively as compared to the corresponding first quarter of the preceding year. The construction division recorded revenue of RM101.8 million and profit before tax of RM1.7 million as compared to the corresponding first quarter of the preceding year of RM66.3 million and RM1.5 million respectively. The increase in revenue and profit before tax were mainly due to higher progressive construction progress recognised from certain projects during the financial period under review. The property development division’s revenue and profit before tax amounted to RM48.4 million and RM13.5 million as compared to the corresponding first quarter of the preceding year of RM42.4 million and RM8.0 million respectively. The increase in revenue and profit before tax were mainly due to higher sales generated from a completed development project.
4. Quarter on Quarter Comparisons showed the revenue has been on a uptrend every quarter, give or take a few one off higher ones (Q3 FY18). And then take a look at the Q1 results from the last few years, it has been on an uptrend - from a RM 5.28m PBT, to RM 9.9m, to RM 12.4m til yesterday, RM 16.741m.
If you take into account of the quarter results of most of its peers in the construction sector... you will find this that the EPS for the FY19 quarter vs the same quarter of FY18 as below... most of them show a lower Y-o-Y quarter results...
5253 = 1.63 vs 1.77
7047 = -2.21 vs 1.51
9261 = 2.01 vs 3.82
5398 = 7.02 vs 8.60
5226 = 2.31 vs 3.54
0198 = 1.13 vs 1.30
9571 = -0.48 vs 2.79
9598 = 3.0 vs 3.9
5263 = 2.4 vs 2.77
With an exception of a few good ones... like IJM (6.64 vs 0.31), INTA (1.12 vs 0.76), PESONA (0.46 vs 0.43), TRC (2.71 vs 0.31)... and on CRESBLD... 6 vs 4.5.
6. Crest Builder has a book value of RM 2.96. At current trading prices, it is trading at a ridiculously low P/B ratio of 0.35.
In comparison, IJM trades at 0.53 P/B, SUNCON at 4.14 P/B, TRC at 0.73...
7. They have a RM 1.1bil outstanding unbilled order book.
Their largest clients are big boy developers such as Sime Darby Property and Desa ParkCity.
They have an annual order book replenishment target of about RM 500 mil per year. Last year, they secured RM 600+ mil, and so far this year they have secured RM 100mil.
8. Dividends. Not that good. But very stable. And consistent.
Nope, they are not doing an Air Asia. No 90 cent pay out. But they're still paying out 4.5 cents in dividends this year. Quite decent for a construction counter.
9. Recurring Income
If you compare Crest Builder to its more similar peers such as INTA, GDB, ADVANCECON, MITRAJAYA... you will see that Crest has a steady stream of recurring income.
Crest owns two investment properties - the Crest at 3 Two Square (I think that is where their office is) and Tierra Crest, in Petaling Jaya. Both properties are considered to be matured properties already, probably due for some upgrading and renovation. According to their Annual Report 2018, the investment holding division reported a revenue of RM15.9 million and I think this is a plus point to the financials.
Crest also owns a concession business - a 23 year UiTM concession. Under this concession, the MOE pays them RM 43.5mil every year and a profit of about RM 10 mil every year.
10. Gearing Ratio Improving
If you look at Crest's gearing, it is rather high. I asked my friends in Crest Builder this question - and was told this was due to the financing for the UiTM project whereby they took a RM 500 mil sukuk as well as the long term loans secured against its investment properties.
Well, I think this sounds totally logical. I guess if you were to remove these long term finances, their gearing could be as low, or lower than its closest peers.
SO THOSE WERE THE PART 1 OF THE STRONG POINTS OF CREST BUILDER.
LETS GO TO THE MORE NOT-SO-OBVIOUS ONES. ONES THAT HAS A LOT MORE POTENTIAL IN BRINGING AND PUSHING THE COMPANY TO HIGHER LEVELS.... and obviously, higher share prices haha.
A. Let us look at Price/Earnings ratio. P/E ratio.
At current prices, Crest Builder trades at P/E of 2.6x.
How about its peers?
ADVCON 15x
AZRB 17x
ECONBHD 40x
FAJAR 72x
GADANG 8x
GBGAQRS 11x
GDB 6.5x
IJM 18x
INTA 6.6x
KERJAYA 10x
MITRA 14x
MRCB 48x
PESONA 19x
SUNCON 18x
TRC 10x
VIZIONE 9x
WCT 12x
So is this the CHEAPEST CONSTRUCTION COUNTER ON BURSA?
If u take the average of the 17 counters I mentioned, the average is 19.6. Lets say we remove the sky highs (FAJAR, MRCB, ECON), the average would still be 12x.
Lets do a bit of discounting here.
Industry average 12x.
Crest does not do infrastructure projects (such as IJM, TRC, MITRA) -2
Crest is not linked with mega projects (such as GAMUDA, IJM, SUNCON) -2
Crest has no direct/indirect links with the current government (such as IJM, VIZIONE) -2
TAKING THESE -2-2-2 = the expected P/E for CRESBLD should be 6.
Assuming Crest trades at 6x, the PRICE SHOULD BE almost RM 2.50!
Lets throw in some further discounts, perhaps Crest should trade at 4x.
EVEN AT 4x, THE PRICE SHOULD BE IN THE RANGE OF RM 1.60, and not 1.06.
B. Lets look at some of their projects...
Specifically, their mega property development projects coming up.
For a company that has a market cap of less than RM 200 mil, they do have quite some mega property projects coming soon.
They have the developments rights to the redevelopment of the Dang Wangi LRT Station as well as the Kelana Jaya LRT station, and also the MRB land opposite GE Mall. The estimated GDV for these projects combined is about RM 3.5-4 bil if I am not mistaken.
While normal developments would probably make a margin of 15-30%, these joint ventures perhaps anywhere between 10-20%. So lets take 15% in between.
Crest would be able to profit between RM 500-600 mil from these projects. Assuming we take a linear split, say over 10 years, this would make up RM 60 mil per year for the next 10 years.
Question mark... When will the developments take place?
I read that the Dang Wangi project is undergoing some design changes and would probably only commence towards end of the year or next year. For the other 2 projects, no status update could be found online so far.
C. Potential New Income Stream
According to news reports, Crest is pushing for a new income stream under their M&E division. I think this one has a lot of potential - the jobs are smaller, but the margins are way better. It has a subsidiary called CB Tech (M) Sdn Bhd - whereby its core specialties are in the field of Air Conditioning and Mechanical Ventilation, Electrical, Firefighting, Cold Water and Plumbing as well as Gas.
CB Tech has a China client in China State Construction for the Media City project. I wonder if CB Tech is a regular for China State - because China State Construction has so many projects all over the country. CB Tech potentially would benefit from this.
D. Interesting Institutional Shareholders
I managed to extract this information from its October 2018 corporate presentation.
And then extracting information from the Annual Report 2018, I noticed the following shareholders.
DBS Bank Ltd
Great Eastern Life Assurance (Malaysia) Berhad
Public Smallcap Fund
Public Strategic Smallcap Fund
Public Ittikal Sequel Fund
Not that many, but they do have a good set of institutional shareholders.
Amongst the list, I also noticed one interesting individual with a familiar name - Mr Lim Han Weng who holds almost 2% of Crest shares. I believe this Mr Lim Han Weng, is the same billionaire Lim Han Weng - ranked no.35 on the Forbes list in Malaysia. Owner of YINSON Holdings.
These large insurance funds, institutional funds as well as prudent and prominent billionaire believe in the counter - and I think it carries a very strong point here.
E. Assets List
Similar to point 9 above, I wish to highlight on a their asset list.
Based on Annual Report 2018, they have a couple of interesting assets in the list of properties.
Tierra Crest is valued at RM 158 mil.
The Crest is valued at RM 105 mil.
The Crest car parks valued at RM 16.5 mil.
Avenue Crest retail and car parks valued at RM 31 mil.
The rest are some random shops and offices.
Take the assets above, you'll find that it totals up to over RM 300 mil in assets.
What is their market cap now? Yes, less than RM 200 mil, with over RM 300 mil in assets. If you want to buy value at a discount, Crest Builder would be a very good buy. In fact, I would recommend this 'option' to avid investors out there - those who wish to buy out Crest's assets of RM 300 mil, you can take over the company at less than RM 200 mil and own over RM 300 mil of properties.
Value? Definitely.
I think these 5 points, A,B,C,D and E are already very good. But then I think we should commend the management team too.
F. Key management Profile
Turns out I did sight another Yong on the profile, not on the Directors, but a Yong Tiok Nee who is Head of Construction Solutions and Property Management. A Melbourne graduate in Property and Construction. Still quite young, but already the head since 2015. The CEO is Mr Teh Hock Hua - a UM first class graduate, and a Crest Builder loyalist. The Annual Report stated he joined Crest Builder in 1998 (same year of graduation) and worked his way up and was appointed as CEO in 2017. Then, they have a registered Professional Engineer in Ir Dr Siew Woh Hon who heads the M&E Division. Not sure when he joined, but I supposed he could be the main reason Crest has been securing M&E contracts. Then theres a Mr Sze To Paul (Paui or Paul) Khay who has been COO since 2017 for Property Division.
The Board of Directors have been quite the same since its listing in 2003, except Mr Eric Yong who was appointed since 2008 and Mr Lim Boon Teng who was appointed in 2017.
Considered quite the old timers I would say - not because they are old, but because there are many loyal people in the Group based on its management. Nowadays, CEOs and COOs are all on contract basis, and usually dont last beyond 3 years.
Okay, I think that would be all for now.
As of now, Mr Eric Yong still havent approved me as a friend yet on Facebook - but I have messaged him personally already and I do hope he will see this and approve me soon. I have so many questions! One of my sifu Mr H has been very supportive of this counter since I started following him, and I realized why now... it has so much potential.
The main problem on this is that it does not have enough liquidity - not enough buyers, and not enough sellers.
Coverage has been quite mediocre - so far this year I only see one report from Rakuten.
So far, I dont have enough information to come up with Part 3 - but if I am able to communicate with the reps of Crest Builder, I think I can write more.
Selamat Hari Raya Aidilfitri and happy holidays!
https://klse.i3investor.com/blogs/callmejholow/208958.jsp
