CGS International Securities
May 26, 2025
BRC Asia Expands into Malaysia: Market Share Surge, Robust Dividend Yields, and Upbeat Financials
Overview: BRC Asia’s Strategic Leap and Financial Momentum
BRC Asia Ltd, a leading supplier of prefabricated reinforcing steel solutions, is making bold strides in Southeast Asia’s building materials sector. The company has not only reported robust earnings growth for the first half of FY9/25 but is also executing a game-changing acquisition in Malaysia, positioning itself for even greater regional influence. Investors are taking note of its strong dividend yields, resilient order book, and consistent financial performance, all underpinned by a commitment to ESG standards and operational excellence.
Report at a Glance
- Broker: CGS International Securities
- Date: May 26, 2025
- Coverage: BRC Asia Ltd and industry peers
Strategic Expansion: Acquiring Malaysian Market Share
On April 22, 2025, BRC Asia announced its proposed acquisition of a 55% stake in Southern Steel Mesh (SSM) for RM61.05 million (S\$18.2 million), a move that will grant BRC a significant c.15% share of Malaysia’s downstream steel market. SSM operates four manufacturing plants across Central and Northern Malaysia, producing steel wire mesh, concrete wires, hard-drawn wires, and cut-and-bend rebars.
Key points of the acquisition:
- BRC’s existing Johor plant has a negligible share in Malaysia, mostly serving Singapore.
- Management sees the SSM acquisition as a value-unlocking play. Plans include updating SSM’s machinery and aligning operations to best-in-class benchmarks.
- This will enhance SSM’s competitiveness, especially against rivals with aging technology.
- The acquisition is subject to EGM approval, as the vendor, Southern Steel Berhad, is a subsidiary of Green Esteel, BRC’s controlling shareholder.
Strong Financial Performance: 1HFY9/25 Results and Order Book
BRC Asia reported a 1HFY9/25 net profit of S\$42 million, representing a 9% year-on-year increase and exceeding 53% of the FY25F estimate.
- Revenue: S\$716 million for 1H25, down 6% YoY due to lower steel prices, but offset by a roughly 5% increase in delivery tonnage.
- Gross Profit: Fell 10% YoY to S\$75 million, impacted by a S\$7.7 million provision for onerous contracts (versus a S\$3.1 million reversal in 1H24). Excluding this, gross profit was up 5% YoY.
- Order Book: Reached a record high of S\$1.5 billion as of March 31, 2025, up from S\$1.4 billion at FY9/24.
- Dividend: Interim DPS of 6 Singapore cents (unchanged YoY; payout ratio: 39%).
- Net Profit: S\$42.1 million, up 9.2% YoY.
- Finance Costs: Lower by S\$2.8 million YoY.
- Favourable FX/Derivatives Movements: Positive impact of S\$7.2 million.
Valuation, Target Price, and Shareholder Structure
- Current Price: S\$3.13
- Target Price: S\$3.40 (revised up from S\$2.70)
- Target P/BV: 1.9x CY25F, +0.7 s.d. above BRC’s 20-year average
- Major Shareholder: Esteel Enterprise (71.7% ownership)
- Free Float: 28.3%
- Market Cap: US\$667.9 million (S\$858.7 million)
Dividend and Earnings Outlook
BRC’s high dividend payout is viewed as sustainable for FY25-FY27, with a projected yield of 6.4%. Earnings forecasts have been raised by 4.2%–6.7% for FY25F–FY27F, reflecting toned-down assumptions for operating and finance expenses.
Key Financial Table:
| Year (Sep) |
2023A |
2024A |
2025F |
2026F |
2027F |
| Revenue (S\$ m) |
1,627 |
1,481 |
1,474 |
1,518 |
1,518 |
| Operating EBITDA (S\$ m) |
129.5 |
142.8 |
127.0 |
130.8 |
132.0 |
| Net Profit (S\$ m) |
60.66 |
77.08 |
82.65 |
85.61 |
86.40 |
| Core EPS (S\$) |
0.30 |
0.28 |
0.30 |
0.31 |
0.31 |
| Dividend (S\$) |
0.16 |
0.20 |
0.20 |
0.20 |
0.20 |
| Dividend Yield (%) |
5.11% |
6.39% |
6.39% |
6.39% |
6.39% |
| P/BV (x) |
2.01 |
1.81 |
1.71 |
1.61 |
1.52 |
| ROE (%) |
19.6% |
17.1% |
16.9% |
16.5% |
15.7% |
| Net Gearing (%) |
45.9% |
11.4% |
3.7% |
(2.8%) |
(10.7%) |
Peer Comparison: Building Materials Sector Snapshot
The table below compares BRC Asia with major listed peers in the sector:
| Company |
Ticker |
Rec. |
Price |
Target Price |
Market Cap (US\$ m) |
P/E CY25F |
P/BV CY25F |
ROE CY25F |
EV/EBITDA CY25F |
Div Yield CY25F |
| BRC Asia Ltd |
BRC SP |
Add |
3.13 |
3.40 |
668 |
10.3 |
1.68 |
16.8% |
6.8 |
6.4% |
| Hong Leong Asia |
HLA SP |
Add |
1.20 |
1.75 |
698 |
9.1 |
0.83 |
9.3% |
6.0 |
3.8% |
| Pan-United Corp Ltd |
PAN SP |
Add |
0.73 |
0.75 |
394 |
11.5 |
1.76 |
15.8% |
5.5 |
4.4% |
| Sector Mean |
|
|
|
|
|
10.3 |
1.43 |
14.0% |
6.1 |
4.9% |
ESG and Operational Excellence: Focus on Sustainability
BRC Asia is committed to strong ESG practices and operational efficiency:
- Supplies prefabricated steel to improve on-site productivity, reduce construction cycle times, and enhance buildability.
- Focused on product quality through ISO 9001:2015 standards and compliance with British and Singapore Standards for reinforcing steel.
- Progressive reduction in material scrap generation; all steel scrap sold to collectors for recycling.
- Workforce predominantly foreign workers (80% in FY21), exposing the company to regulatory risks around Singapore’s Dependency Ratio Ceiling (DRC).
- Robust workplace safety improvements, with Accident Frequency Rate down to 2.9 in FY23 from 14.3 in FY21, and Accident Severity Rate down to 88.4 from 330.2 over the same period.
- Maintaining high safety standards is critical to securing future order wins and protecting BRC’s market leadership.
Key Financial Ratios and Balance Sheet Strength
- Operating EBITDA Margin: Steady at 8.62%–9.64%.
- Net Cash per Share: Improving from -S\$0.71 (2023A) to S\$0.22 (2027F).
- Book Value per Share: Rising from S\$1.56 (2023A) to S\$2.06 (2027F).
- Gross Interest Cover: Strengthening from 8.64x (2023A) to 13.37x (2027F).
- Net Dividend Payout Ratio: Projected to reach 63.5% by 2027F.
- ROIC/ROCE: Robust at 16.7%–17.8% and 14.9%–15.3% respectively for FY25F–FY27F.
Risks and Catalysts
Potential Upside Catalysts:
- Stronger offtake volumes and earnings-accretive M&A activity.
Key Risks:
- Counterparty credit risk.
- Macroeconomic slowdown impacting construction demand.
- Regulatory changes affecting foreign labor employment and wage costs.
Conclusion: Investment Outlook and Recommendation
CGS International Securities reiterates an “Add” recommendation for BRC Asia, highlighting its sustainable dividend yield, record order book, strategic expansion into Malaysia, and ongoing operational improvements. The revised target price of S\$3.40 signals further upside potential, with BRC’s disciplined approach to cost control, ESG, and cash flow management cementing its leadership in the regional building materials sector.
Stock Ratings Framework
- Add: Total return expected to exceed 10% over the next 12 months.
- Hold: Total return between 0–10%.
- Reduce: Total return expected to fall below 0%.
Sector and country weightings are provided for additional context.
Final Word
BRC Asia’s strategic acquisition, robust dividend yields, and sound financials make it a noteworthy contender for investors seeking exposure to Southeast Asia’s construction and building materials sector. With a clear focus on growth, efficiency, and sustainability, BRC is well-positioned to capitalize on opportunities in both Singapore and Malaysia in the years ahead.
