This Company's Profit Jumps ~4X in 2 Years; Can Malaysia Help Power The Next Leg?

• Lim Thiam Hooi, co-founder of Lum Chang Creations, passionately describes the company as something built “with my two hands”.

MD Lim Thiam Hooi says an ordinary contractor might simply call an “Ah Beng” subcontractor to fabricate and procure something. Lum Chang Creations instead prepares the technical drawings and orders directly from China. He self-deprecatingly jokes that he himself is the “Ah Beng”— and retains the subcontractor’s margin.• Confident and candid, he asserts that profits would continue to rise, margins stay strong and so will the order book -- and he has an invitation to "hand in hand we walk together" and share the rewards.

• The numbers reflect his confidence: The company has gone from $4.7 million net profit in FY2024 to $22.3 million in FY2026 (ended June).

• He cites a “vanity versus sanity” argument: a large order book is vanity if it earns very little profit.
 

• Injecting jokes and Hokkien and Singlish flavoured expressions, the self-described "Ah Beng" shares his business acumen developed through decades of hands-on work:

• select specialised jobs with less price competition;
• combine conservation, A&A and interior fit-out to offer clients a complete solution;
• understand and price risks that ordinary contractors struggle to price;
• procure directly instead of paying layers of subcontractor mark-ups;
• lock in major supplier costs after winning a contract.
  
  

• Following the recent FY2026 results briefing, CGS International's report adjusts some of its previous forecast metrics (such as revenue) and delves into the company's expansion into Malaysia.

• While Lum Chang Creations exhibits strong margins, net cash, superior ROE, earnings growth and an attractive dividend yield, CGS' ~100% upside in its 64-cent target price looks aggressive -- until big order wins and strong profits actually arrive. Read excerpts of its report below .....

■ We raise our FY6/27F order win assumptions to S$170m (from S$140m), as we believe there are opportunities for LUCC to win tenders in Malaysia.

■ Niche project mix and execution should support elevated FY27F/28F GPM of c.29%/28% (FY26: c.35%), higher than FY23-25 average of c.20%.

■ Reiterate Add with unchanged S$0.64 TP, based on 14x FY28F P/E, with an attractive FY27F yield of c.8% (FY27F DPS: 2.4 Scts).

S$’000

FY2022

FY2023

FY2024

FY2025

FY2026

Revenue

14,036

39,430

58,973

113,550

101,573

GP

1,802

8,258

10,652

22,381

36,042

PBT

593

5,712

6,783

16,504

28,084

Net Profit

503

4,536

4,723

12,911

22,262

We raise our FY27F/28F EPS by +2%/+8% to S$25.2m/S$29.4m, on higher margin assumptions, offsetting our conservative revenue recognition forecasts.

Then Wan Lin, CGS analystReiterate Add with an unchanged TP of S$0.64, based on 15x FY28F P/E (sector average, with a premium due to its superior profit margin and ROE vs. other SG construction and fit-out companies) as we roll forward our valuation.

Management remains confident to sustain a total dividend level of c.S$15m so long as business conditions remain healthy, which would imply a 60% payout in FY27F, translating into an FY27F DPS of 2.4 Scts.

We continue to like the stock for its attractive FY27F dividend yield of c.8% dividend yield and superior GPM compared to other interior fit-out players.

Re-rating catalysts: stronger-than-expected order wins and margins.

Downside risks: project delays, weaker order replenishment and cost overruns.