CGS International
May 26, 2025
BRC Asia Ltd: Acquiring Malaysian Market Share
Key Takeaways
- BRC Asia’s 1HFY9/25 net profit reached S\$42m, a 9% year-over-year increase, accounting for 53% of FY25F estimates. [[1]]
- The company’s new order book hit a high of S\$1.5bn as of March 31, 2025, compared to S\$1.4bn in FY9/24. [[1]]
- BRC is advancing its M&A strategy with a proposed 55% stake acquisition of Southern Steel Mesh, giving it an estimated 15% share in the Malaysian market. [[1]]
- The recommendation is to Add; the FY26F dividend yield is attractive at 6.4%. [[1]]
Acquiring Malaysian Market Share
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). [[1]]
- SSM operates in the same sector as BRC, manufacturing and selling steel wire mesh, concrete wires, hard-drawn wires, and cut and bend rebars. [[1]]
- SSM has four manufacturing plants located in the Central and Northern regions of Malaysia. [[1]]
- BRC has a manufacturing plant in Johor but a negligible share in the Malaysian market. [[1]]
Strategic Rationale
Management views the acquisition of SSM as a value-unlocking opportunity. This will require upgrading SSM’s machinery and aligning its practices with industry benchmarks, enhancing its competitiveness against other downstream steel manufacturers. [[1]]
- The acquisition will provide BRC with an estimated 15% share of the Malaysian downstream steel market. [[1]]
- It will expand BRC’s footprint across Malaysia. [[1]]
- The acquisition is subject to an EGM, as vendor SSB is a subsidiary of BRC’s controlling shareholder, Green Esteel. [[1]]
1HFY9/25 Results
BRC reported a 1HFY9/25 net profit of S\$42m (+9% or +S\$4m year-over-year), slightly above expectations at 53% of the FY25F estimate. [[1]]
- The higher net profit was attributed to favorable FX/derivative movements (+S\$7.2m) and lower finance costs (-S\$2.8m year-over-year). [[1]]
- Revenue fell 6% year-over-year to S\$716m due to lower steel prices, partially offset by higher delivery tonnage (estimated +5% year-over-year). [[1]]
- Gross profit was down 10% year-over-year to S\$75m due to a provision of 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 year-over-year. [[1]]
- BRC proposed an interim dividend per share of 6 Singapore cents (unchanged year-over-year, payout ratio: 39%). [[1]]
- Despite lower steel prices, BRC’s order book reached a new high of S\$1.5bn as of March 31, 2025 (FY9/24: S\$1.4bn). [[1]]
Recommendation
The recommendation is to Add with a higher target price of S\$3.40. The high dividend payout is seen as sustainable in FY25-27F amid healthy industry fundamentals. [[1]]
- The target price is raised to S\$3.40, now pegged to 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 historical average of 1.5x) due to earnings revisions. [[1]]
- Potential re-rating catalysts include strong improvements in offtake volumes and earnings-accretive M&A. [[1]]
- Downside risks include counterparty credit risks and an economic slowdown impacting construction demand. [[1]]
Key Changes
- FY25F-27F EPS estimates have been raised by 4.2-6.7% due to toned-down operating and finance expense assumptions. [[1]]
- This note also marks a change in analyst coverage. [[1]]
Shareholder Information
- Major shareholders: Esteel Enterprise holds 71.7% of shares. [[1]]
- Free float: 28.3%. [[1]]
Financial Summary
| 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% of our 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 | P/E (x) 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
Overview
BRC Asia Ltd supplies prefabricated reinforcing steel solutions, which benefits the construction industry through on-site manpower savings, shorter construction cycles, and improved buildability and productivity. [[4]] The company focuses on maintaining strong product quality and optimizing production efficiencies to reduce scrap and improve workplace safety, as detailed in its FY23 sustainability report. [[4]] A key near-term operational risk is the company’s reliance on foreign workers. [[4]]
Keep Your Eye On
The majority of BRC’s employees are foreign workers, accounting for 80% of its workforce in FY21. [[4]] Regulatory changes on the Dependency Ratio Ceiling (DRC) are important to monitor as the government aims to grow the local workforce. [[4]]
- Changes in Singapore’s DRC could lead to higher wage expenses for BRC. [[4]]
- Border restrictions could disrupt workforce recruitment. [[4]]
ESG Highlights
BRC emphasizes product quality and material efficiency. [[4]]
- The company complies with ISO 9001:2015 and sources from suppliers that meet British Standard BS4449:2005 or Singapore Standard SS560:2016. [[4]]
- BRC aims to lower material scrap generation and sells steel scrap to collectors as part of its material management efforts. [[4]]
Maintaining high-quality standards is crucial for reducing risks and costs associated with faulty goods and maintaining BRC’s market leadership in prefabricated steel solutions. [[4]]
Trends
BRC’s Accident Frequency Rate (AFR) declined to 2.9 in FY23 (FY21: 14.3), and its Accident Severity Rate (ASR) fell to 88.4 in FY23 (FY21: 330.2), according to its sustainability report for FY23. [[4]]
Workplace safety is essential due to inherent accident risks. [[4]] Fatal accidents could severely damage BRC’s reputation and ability to secure future orders. [[4]]
Key Financial Metrics
P/BV vs ROE
Rolling P/BV (x) (lhs) ROE (rhs). [[5]]
12-mth Fwd FD Core P/E vs FD Core EPS Growth
12-mth Fwd Rolling FD Core P/E (x) (lhs) FD Core EPS Growth (rhs). [[5]]
Profit & Loss
| (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 |
| Exceptional Items | |||||
| Pre-tax Profit | 91 | 111 | 100 | 104 | 105 |
| Taxation | -15 | -18 | -18 | -18 | -18 |
| Exceptional Income – post-tax | |||||
| Profit After Tax | 76 | 94 | 83 | 86 | 86 |
| Minority Interests | 0 | 0 | 0 | 0 | 0 |
| Preferred Dividends | |||||
| FX Gain/(Loss) – post tax | |||||
| Other Adjustments – post-tax | |||||
| Preference Dividends (Australia) | |||||
| 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 |
| (Incr)/Decr in Total Provisions | |||||
| Other Non-Cash (Income)/Expense | |||||
| 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) |
| Disposals Of FAs/subsidiaries | |||||
| Acq. Of Subsidiaries/investments | |||||
| 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) |
| Proceeds From Issue Of Shares | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Shares Repurchased | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Dividends Paid | (32.9) | (30.2) | (54.9) | (54.9) | (54.9) |
| Preferred Dividends | |||||
| 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
Related Posts
|