Construction firm Chip Eng Seng Corp bought back for the first time since December 2012 with 565,000 shares purchased from Dec 26 to 27 at an average of 70.8 cents each. The repurchases were made on the back of the 11 per cent rebound in the share price since September from 64 cents.
CES made another share buyback today, a bigger 945,000 shares, at slightly above 72ct. The recent share buyback is positive, especially when it’s done at convincing quantities.
As I pass by CES’ Alexandra project regularly, I notice that construction work looks smooth and speedy. I will not be surprised if the retail shops TOP by end 2014. If this is so, 2014 will be a bumper year for CES. It could possibly report a net profit of $220m, or about 34 ct per share. Based on a share price of 72ct, that gives a PE of 2.1 times for FY 2014.
I am not too excited about CES’ last 2 purchases in Melbourne, as (1) the first site’s GDV is not huge; (2) the second property at St Kilda will probably be kept as a medium-term investment.
Meanwhile, a recent addition to my portfolio, Oxley has also run up the past few days. I have nothing much to write about Oxley as I still find it hard to go into a detailed analysis of its various projects. Nevertheless, Oxley is a sexy stock which has recently made it into my core list of property developer stocks, which now consists of the following: CES, KSH, Oxley, Hiap Hoe, Superbowl, Ho Bee Land, HPL, Pollux and Roxy-Pac. I also own small quantities of LKH, Amara, Bonvest, UE and Banyan Tree at the moment.
CHIP ENG SENG
The following share buy-back done by Chip Eng Seng Corporation Ltd.:
1) 136,000 shares per notice 00062 broadcasted on 27/12/2013
2) 429,000 shares per notice 00067 broadcasted on 27/12/2013 and
3) 945,000 shares per notice 00103 broadcasted on 30/12/2013
Tan Yong Keng on 30/12/2013 bought 4,132,000 CES shares. This raised his holding from 47,647,000 shares (7.3663%) to 51,779,000 shares (8.0052%)
A couple of days ago, OCBC put up a report on how an earnings spike due to “Completion of Contract” accounting method led to a subsequent surge in Oxley’s share price. It then went on to mention 2 other companies which would see jumps in earnings due to the same accounting practice, albeit on a much smaller scale. These are Roxy and Lian Beng.
Meanwhile, come 2014, Chip Eng Seng could be the stock to watch for “Completion of Contract” lumpy profits. My earlier posting has highlighted that it has 3 projects which will TOP in 2014 and whose profits will be booked lump sum, at one go. These are Belvia, Belysa and 100PP. They are DBSS, EC and industrial projects, respectively.
These projects, together with CES’ construction profits and bookings from Fulcrum, could see CES booking about $95m net profit for the full year. This compares with an estimated $41m 2013 profit (to be released soon).
If the 3 projects TOP in 3 different quarters, we will get 3 different quarters of lumpy profits.
Added to this is the possibility that Alexandra Central’s (AC) shops could TOP in Q4 2014, which could see another $100m in net profit. This could mean a 1,000% jump in net profit for Q4 2014 (compared to a lackluster Q4 2013).
Note that if AC indeed TOPs in Q4 2014, then CES could book a net profit of as much as $200m for 2014, and an EPS of more than 30ct. This will mean a PE of about 2.2 times.
CES also has a history of being very generous with dividend payout, giving the stock another added sexiness.
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