CGS International
May 26, 2025
BRC Asia Ltd: Acquiring Malaysian Market Share and Attractive Dividend Yield
Key Highlights
- 1HFY9/25 net profit of S\$42m (+9% yoy) was 53% of our FY25F estimate.
- New order book hit a high of S\$1.5bn as at 31 Mar 2025 (FY9/24: S\$1.4bn).
- BRC delivered on its M&A strategy with the proposed 55% stake acquisition of Southern Steel Mesh, giving it a c.15% share in the Malaysian market.
- Reiterate Add; FY26F dividend yield remains attractive at 6.4%, in our view.
Acquiring Malaysian Market Share with SSM Stake
On April 22, 2025, BRC Asia Ltd announced its proposed acquisition of a 55% stake in Southern Steel Mesh (SSM), a non-listed entity, from Southern Steel Behard for a purchase consideration of RM61.05m (S\$18.2m). SSM operates in the same sector as BRC, focusing on manufacturing and selling steel wire mesh, concrete wires, hard-drawn wires, and cut and bend rebars. SSM has four manufacturing plants in the Central and Northern regions of Malaysia. [[1]]
During an analyst briefing on May 23, 2025, BRC management indicated that while BRC has a manufacturing plant in Johor, its share in the Malaysian market is negligible, as it primarily manufactures products for consumption in Singapore. The acquisition of SSM is viewed as a value-unlocking opportunity. This involves updating SSM’s machinery and aligning its practices with best-in-class benchmarks, enhancing its competitiveness against other downstream steel manufacturers with older equipment. [[1]]
The acquisition will provide BRC with an estimated 15% share of the Malaysian downstream steel market and expand its footprint across Malaysia. The deal is subject to an EGM, as vendor SSB is a subsidiary of BRC’s controlling shareholder, Green Esteel. [[2]]
1HFY9/25 Results: Record Order Book
BRC reported a 1HFY9/25 net profit of S\$42m, a 9% increase year-over-year. This figure represents 53% of the FY25F estimate. The company attributed the higher net profit to favorable FX/derivative movements (+S\$7.2m) and lower finance costs (-S\$2.8m yoy). Revenue fell 6% yoy to S\$716m due to lower steel prices, although this was partially offset by higher delivery tonnage (estimated at 5% higher yoy). [[2]]
Gross profit decreased by 10% yoy to S\$75m due to a provision for onerous contracts amounting to S\$7.7m in 1H25, compared to a S\$3.1m reversal in 1H24. Excluding this, gross profit was 5% higher yoy. BRC proposed an interim DPS of 6 Scts, which is unchanged yoy, with a payout ratio of 39%. Despite lower steel prices, BRC’s order book reached a new high of S\$1.5bn as of March 31, 2025, compared to S\$1.4bn in FY9/24. [[2]]
Investment Recommendation
The recommendation for BRC is reiterated as an Add, based on the sustainability of its high dividend payout in FY25-27F amid healthy industry fundamentals. The target price is raised to S\$3.40, pegged to a CY25F P/BV of 1.9x (+0.7 s.d. from BRC’s 20-year historical P/BV; GGM: ROE 16%, cost of equity 10%, terminal growth 1%, previously pegged to a historical average of 1.5x) due to earnings revisions. Potential re-rating catalysts include strong improvements in offtake volumes and earnings-accretive M&A. [[2]]
Downside risks include counterparty credit risks and an economic slowdown impacting construction demand. [[3]]
Key Changes Noted
FY25F-27F EPS estimates have been raised by 4.2-6.7% due to a toning down of operating and finance expense assumptions. This note also marks a change in analyst coverage. [[3]]
Financial Summary
|
Sep-23A |
Sep-24A |
Sep-25F |
Sep-26F |
Sep-27F |
| 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 |
| Core EPS Growth |
(10.4%) |
(5.0%) |
7.3% |
3.6% |
0.9% |
| FD Core P/E (x) |
10.56 |
11.15 |
10.39 |
10.03 |
9.94 |
| DPS (S\$) |
0.16 |
0.20 |
0.20 |
0.20 |
0.20 |
| Dividend Yield |
5.11% |
6.39% |
6.39% |
6.39% |
6.39% |
| EV/EBITDA (x) |
8.11 |
6.39 |
6.91 |
6.45 |
6.04 |
| P/FCFE (x) |
6.36 |
4.53 |
11.64 |
12.00 |
10.26 |
| Net Gearing |
45.9% |
11.4% |
3.7% |
(2.8%) |
(10.7%) |
| P/BV (x) |
2.01 |
1.81 |
1.71 |
1.61 |
1.52 |
| ROE |
19.6% |
17.1% |
16.9% |
16.5% |
15.7% |
| % Change In Core EPS Estimates |
|
|
4.20% |
6.73% |
6.70% |
| EPS/Consensus EPS (x) |
|
|
0.99 |
1.01 |
1.02 |
Results Comparison
| FYE Sep (S\$ m) |
2HFY25 |
2HFY24 |
yoy chg |
2HFY24 |
hoh chg |
FY24 |
FY23 |
yoy chg |
Prev. FY25F |
Comments |
| Revenue |
715.6 |
758.3 |
-5.6% |
723.1 |
-1.0% |
1,481.4 |
1,627.0 |
-9.0% |
1,492.0 |
In line, 1H25 formed 48% of our FY25F |
| Gross profit |
67.4 |
74.7 |
-9.7% |
79.1 |
-14.8% |
153.8 |
139.0 |
10.6% |
155.7 |
|
| GPM |
9.4% |
9.8% |
-0.4% pts |
10.9% |
-1.5% pts |
10.4% |
8.5% |
1.8% pts |
10.4% |
|
| Operating expenses |
(12.8) |
(19.6) |
-34.5% |
(10.6) |
21.1% |
(30.2) |
(28.0) |
7.9% |
(49.2) |
|
| Operating profit |
54.6 |
55.1 |
-0.9% |
68.5 |
-20.4% |
123.6 |
111.1 |
11.3% |
106.4 |
In line, 1H25 formed 51% ofour FY25F |
| OPM |
7.6% |
7.3% |
0.4% pts |
9.5% |
-1.9% pts |
8.3% |
6.8% |
1.5% pts |
7.1% |
|
| Finance costs |
(3.8) |
(6.6) |
-42.0% |
(4.7) |
-18.4% |
(11.3) |
(12.9) |
-12.3% |
(11.0) |
|
| Assocs/JV contribution |
0.2 |
(1.5) |
n.m. |
0.4 |
n.m. |
(1.1) |
(7.0) |
n.m. |
(1.0) |
|
| Profit before tax |
51.0 |
47.0 |
8.5% |
64.2 |
-20.6% |
111.2 |
91.2 |
21.9% |
94.4 |
|
| Income tax expense |
(8.9) |
(8.5) |
5.2% |
(8.5) |
5.2% |
(17.6) |
(15.5) |
13.9% |
(15.1) |
|
| Effective tax rate |
17.5% |
18.0% |
-0.5% pts |
13.2% |
4.3% pts |
15.9% |
17.0% |
-1.1% pts |
16.0% |
|
| Net profit |
42.1 |
38.5 |
9.2% |
55.0 |
-23.5% |
93.5 |
75.7 |
23.5% |
79.3 |
|
| Exceptionals |
0.0 |
0.0 |
n.m. |
16.5 |
n.m. |
16.5 |
(5.4) |
n.m. |
0.0 |
|
| Core net profit |
42.1 |
38.5 |
9.2% |
38.5 |
9.2% |
77.0 |
81.1 |
-5.1% |
79.3 |
Slightly above, 1H25 formed 53% of our full-year forecast |
Earnings Revision
| FYE Dec (S\$ m) |
New |
Old |
% change |
|
FY25F |
FY26F |
FY27F |
FY25F |
FY26F |
FY27F |
FY25F |
FY26F |
FY27F |
| Revenue |
1,474.0 |
1,518.2 |
1,518.2 |
1,492.0 |
1,500.0 |
1,506.0 |
-1.2% |
1.2% |
0.8% |
| Gross profit |
147.4 |
157.9 |
157.9 |
155.7 |
156.5 |
157.1 |
-5.3% |
0.9% |
0.5% |
| Operating profit |
107.7 |
111.3 |
112.3 |
106.4 |
107.0 |
107.4 |
1.2% |
4.0% |
4.6% |
| Core net profit |
82.7 |
85.6 |
86.4 |
79.3 |
80.2 |
81.0 |
4.2% |
6.7% |
6.7% |
| Core EPS (scts) |
30.1 |
31.2 |
31.5 |
28.9 |
29.2 |
29.5 |
4.2% |
6.7% |
6.7% |
Peers Comparison
| Company |
Ticker |
Recom. |
Price (lcl curr) |
Target Price (lcl curr) |
Market Cap (US\$ m) |
P/E (x) CY25F |
CY26F |
P/BV (x) CY25F |
Recurring ROE (%) CY25F |
Dividend Yield (%) CY25F |
| BRC Asia Ltd |
BRC SP |
Add |
3.13 |
3.40 |
668 |
10.3 |
10.0 |
1.68 |
16.8% |
6.4% |
| Hong Leong Asia |
HLA SP |
Add |
1.20 |
1.75 |
698 |
9.1 |
7.9 |
0.83 |
9.3% |
3.8% |
| Pan-United Corp Ltd |
PAN SP |
Add |
0.73 |
0.75 |
394 |
11.5 |
11.1 |
1.76 |
15.8% |
4.4% |
| Mean |
|
|
|
|
|
10.3 |
9.7 |
1.43 |
14.0% |
4.9% |
Note: All forecasts for Not Rated companies are based on Bloomberg consensus estimates. Data as of May 26, 2025. [[3]]
ESG Factors
BRC Asia Ltd focuses on delivering prefabricated reinforcing steel solutions, which enhance construction efficiency through on-site manpower savings, shorter construction cycles, and improved buildability. The company prioritizes product quality and production efficiencies to minimize scrap and improve workplace safety. A key operational risk is the company’s reliance on foreign workers. [[4]]
Key ESG Considerations
- Foreign Worker Dependency: A significant portion of BRC’s workforce comprises foreign workers. Changes in Singapore’s Dependency Ratio Ceiling (DRC) could increase wage expenses and disrupt workforce recruitment. [[4]]
- Product Quality and Material Efficiency: BRC emphasizes product quality and material efficiency, sourcing from suppliers that comply with British and Singapore standards for reinforcing steel. The company also focuses on reducing material scrap generation. [[4]]
- Workplace Safety: Workplace safety is a key concern, with BRC reporting a decline in both Accident Frequency Rate (AFR) and Accident Severity Rate (ASR). [[4]]
Financials
| (S\$m) |
Sep-23A |
Sep-24A |
Sep-25F |
Sep-26F |
Sep-27F |
| Total Net Revenues |
1,627 |
1,481 |
1,474 |
1,518 |
1,518 |
| Gross Profit |
139 |
154 |
147 |
158 |
158 |
| Operating EBITDA |
129 |
143 |
127 |
131 |
132 |
| Depreciation And Amortisation |
-18 |
-19 |
-19 |
-20 |
-20 |
| Operating EBIT |
111 |
124 |
108 |
111 |
112 |
| Financial Income/(Expense) |
-13 |
-11 |
-8 |
-8 |
-8 |
| Pretax Income/(Loss) from Assoc. |
-7 |
-1 |
1 |
1 |
1 |
| Non-Operating Income/(Expense) |
0 |
0 |
0 |
0 |
0 |
| Profit Before Tax (pre-EI) |
91 |
111 |
100 |
104 |
105 |
| Taxation |
-15 |
-18 |
-18 |
-18 |
-18 |
| Profit After Tax |
76 |
94 |
83 |
86 |
86 |
| Minority Interests |
0 |
0 |
0 |
0 |
0 |
| Net Profit |
61 |
77 |
83 |
86 |
86 |
| Recurring Net Profit |
81 |
77 |
83 |
86 |
86 |
| Fully Diluted Recurring Net Profit |
81 |
77 |
83 |
86 |
86 |
| Normalised Net Profit |
76 |
94 |
83 |
86 |
86 |
| Fully Diluted Normalised Profit |
61 |
77 |
83 |
86 |
86 |
Cash Flow
| (S\$m) |
Sep-23A |
Sep-24A |
Sep-25F |
Sep-26F |
Sep-27F |
| EBITDA |
129.5 |
142.8 |
127.0 |
130.8 |
132.0 |
| Cash Flow from Invt. & Assoc. |
7.0 |
1.1 |
(0.5) |
(0.7) |
(0.8) |
| Change In Working Capital |
72.0 |
83.6 |
(5.7) |
(11.1) |
0.0 |
| Other Operating Cashflow |
(18.1) |
(9.0) |
5.0 |
5.7 |
6.0 |
| Net Interest (Paid)/Received |
(12.9) |
(11.3) |
(8.0) |
(8.2) |
(8.4) |
| Tax Paid |
(17.9) |
(14.2) |
(17.5) |
(18.2) |
(18.3) |
| Cashflow From Operations |
159.5 |
193.0 |
100.3 |
98.3 |
110.6 |
| Capex |
(3.3) |
(4.3) |
(5.0) |
(5.0) |
(5.0) |
| Other Investing Cashflow |
5.9 |
7.1 |
3.5 |
3.2 |
3.2 |
| Cash Flow From Investing |
2.7 |
2.8 |
(1.5) |
(1.8) |
(1.8) |
| Debt Raised/(repaid) |
(27.4) |
(6.1) |
(25.0) |
(25.0) |
(25.0) |
| Dividends Paid |
(32.9) |
(30.2) |
(54.9) |
(54.9) |
(54.9) |
| Other Financing Cashflow |
(66.7) |
(146.8) |
(8.0) |
(8.2) |
(8.4) |
| Cash Flow From Financing |
(127.0) |
(183.0) |
(87.9) |
(88.1) |
(88.3) |
| Total Cash Generated |
35.2 |
12.8 |
10.9 |
8.5 |
20.4 |
| Free Cashflow To Equity |
134.8 |
189.7 |
73.7 |
71.6 |
83.7 |
| Free Cashflow To Firm |
175.0 |
207.1 |
106.7 |
104.8 |
117.1 |
Balance Sheet
| (S\$m) |
Sep-23A |
Sep-24A |
Sep-25F |
Sep-26F |
Sep-27F |
| Total Cash And Equivalents |
184.6 |
191.4 |
202.3 |
210.7 |
231.2 |
| Total Debtors |
180.6 |
153.1 |
153.5 |
158.1 |
158.1 |
| Inventories |
407.1 |
377.5 |
381.6 |
391.3 |
391.3 |
| Total Other Current Assets |
44.1 |
40.0 |
40.0 |
40.0 |
40.0 |
| Total Current Assets |
816.5 |
762.0 |
777.3 |
800.1 |
820.6 |
| Fixed Assets |
117.6 |
110.9 |
96.6 |
82.1 |
67.4 |
| Total Investments |
14.1 |
10.0 |
10.5 |
11.2 |
12.0 |
| Intangible Assets |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
| Total Other Non-Current Assets |
4.1 |
21.1 |
21.1 |
21.1 |
21.1 |
| Total Non-current Assets |
135.9 |
142.0 |
128.2 |
114.4 |
100.5 |
| Short-term Debt |
359.7 |
227.3 |
202.3 |
177.3 |
152.3 |
| Total Creditors |
89.2 |
128.5 |
127.2 |
130.4 |
130.4 |
| Other Current Liabilities |
46.6 |
42.6 |
42.6 |
42.6 |
42.6 |
| Total Current Liabilities |
495.5 |
398.4 |
372.1 |
350.3 |
325.3 |
| Total Long-term Debt |
21.0 |
18.5 |
18.5 |
18.5 |
18.5 |
| Total Other Non-Current Liabilities |
8.6 |
11.9 |
11.9 |
11.9 |
11.9 |
| Total Non-current Liabilities |
29.6 |
30.4 |
30.4 |
30.4 |
30.4 |
| Total Provisions |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
| Total Liabilities |
525.1 |
428.7 |
402.5 |
380.7 |
355.7 |
| Shareholders’ Equity |
427.3 |
475.3 |
503.1 |
533.8 |
565.4 |
| Minority Interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
| Total Equity |
427.3 |
475.3 |
503.1 |
533.8 |
565.4 |
Key Ratios
|
Sep-23A |
Sep-24A |
Sep-25F |
Sep-26F |
Sep-27F |
| Revenue Growth |
(4.25%) |
(8.95%) |
(0.50%) |
3.00% |
0.00% |
| Operating EBITDA Growth |
(0.1%) |
10.3% |
(11.0%) |
3.0% |
1.0% |
| Operating EBITDA Margin |
7.96% |
9.64% |
8.62% |
8.61% |
8.70% |
| Net Cash Per Share (S\$) |
-0.71 |
-0.20 |
-0.07 |
0.05 |
0.22 |
| BVPS (S\$) |
1.56 |
1.73 |
1.83 |
1.95 |
2.06 |
| Gross Interest Cover |
8.64 |
10.96 |
13.46 |
13.57 |
13.37 |
| Effective Tax Rate |
17.0% |
15.9% |
17.5% |
17.5% |
17.5% |
| Net Dividend Payout Ratio |
47.5% |
49.8% |
66.4% |
64.1% |
63.5% |
| Accounts Receivables Days |
41.31 |
41.23 |
37.96 |
37.45 |
38.00 |
| Inventory Days |
104.6 |
108.1 |
104.4 |
103.7 |
105.0 |
| Accounts Payables Days |
16.28 |
30.00 |
35.17 |
34.57 |
35.00 |
| ROIC (%) |
13.5% |
16.8% |
16.7% |
17.6% |
17.8% |
| ROCE (%) |
13.3% |
16.2% |
14.9% |
15.3% |
15.3% |
| Return On Average Assets |
7.4% |
9.3% |
9.9% |
10.2% |
10.2% |
Key Drivers
|
Sep-23A |
Sep-24A |
Sep-25F |
Sep-26F |
Sep-27F |
| Revenue |
1,627.0 |
1,481.4 |
1,474.0 |
1,518.2 |
1,518.2 |
| GPM (%) |
8.5% |
10.4% |
10.0% |
10.4% |
10.4% |
