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% |
