Sysma Holdings Ltd (Update 2)- Contract win reverses order book decline

Sysma just announced that it had won a $37.7 million contract, from an Oxley Holdings subsidiary, for the erection of  4 blocks of 5-storey residential flats and 3 units of 2-storey strata landed houses in Pasir Panjang. Based on the description, we think the construction work is likely for the popular Oxley development, Verandah Residences, which reportedly sold 76 per cent of its units in its opening weekend alone. 

This contract is notable for a few reasons:

1. Based on past company filings, this is the first non-landed project and also the largest construction contract Sysma has won since Nov 2014 when it won a $58 million contract to build a high-end mixed development project at Oxley Rise.
2. The Oxley Rise project was similarly awarded by Oxley Holdings, making it a repeat customer. 
3. This likely takes its current order book to comfortably above $40 million, reversing the declining order book trend which was a key concern with the Company. 

At the last AGM held in April this year, Sysma's management had struck a positive tone when asked about the prospects of its construction business. The optimism is fueled by an expected increase in demand for contractor services as more en bloc projects gets redeveloped. Should this translate into more contract wins for Sysma in the coming months, it would be hard to see how its shares can continue to trade at a sizeable 25% discount to its fully net-cash backed NTA (Last traded price of $0.151 vs Net cash of $0.22 and NTA of $0.20 per share). 

We continue to stay positive on Sysma.

(All currency above in SGD)​

Oxley's Verandah Residences project (picture from project website)