Sysma Holdings

  • Sysma Holdings- Deputy CEO scoops up >3% of the shares in a single day
    mr sin ee wuen 150x150

    Two notable developments happened in the past week:

    Firstly, Sysma Holdings announced last Tuesday (9 Jul) a fresh contract win worth $4.9 million to build a bungalow in District 10.

    Then, just barely 3 days later, Sin Ee Wuen, Deputy CEO and son of Sysma’s Executive Chairman and major shareholder, Sin Soon Teng, acquired more than 7.6 million or 3% of all Sysma shares from various parties and in the open market last Friday at between $0.16 and 0.17 per share.

    While it is hard to know exactly the intention of this seemingly bullish insider purchase, we note that it also comes very close to Sysma’s financial year-end of 31 July. The average purchase price of $0.166 is also at a substantial discount to the company’s 100% net cash-backed NAV of 22.3 cts per share.

    Hence, the purchase could be taken as a possible sign of positive news flow from its upcoming results announcement or simply a shrewd move to acquire the shares at a bargain price.

    Either way, we remain convinced that the shares deserve to trade at a price closer to its NAV.

  • Sysma Holdings Ltd (Update 3)- Dividend increased by 60% but below our expectations as stock remains laughably cheap
    singapore cash orig

    Some notes on the full year financial report released last week:

    1. Sysma’s FY18 profit came in at $4.0 mil, which was below its half year profit of $4.3 mil, meaning that it likely recorded a loss for 2H18. The main culprit was a non-recurring provision for defective work of $3.8 mil which we assume was for its property development projects.
    2. Revenue continued to decline as expected to $75.2 mil. Out of this, about 60% or $42.6 mil was from property development and the rest from construction.
    3. With the bulk of its property projects fully sold and delivered, leaving behind only 4 shop units at 28 RC Suites, expect the group’s revenue for next year to be closer to this year’s construction revenue of $32.6 mil. The current construction order book of $56.7 mil should be sufficient to ensure this as all but part of the recently clinched Verandah Residences contract will be fully recognised next FY.
    4. Company’s cash hoard continues to build up. It now has $71.5 mil or 28.3 cts per share in net cash and zero bank loans. NTA, which is essentially 100% cash backed, is at $52.6 mil or 20.9 cts per share.
    5. Company declared a dividend of 0.8 cts per share which was 60% higher than last year’s 0.5 cts. At the last traded share price of $0.151, dividend yield is at a pretty decent 5.3%.

    Sysma’s proposed dividend payout was higher than last FY but disappointing given the huge cash pile it sits on. The company can definitely afford a much higher payout of more than 1ct with perhaps an additional special dividend. Since neither materialised, we can only surmise that the management has much better uses of the financial resources at its disposal.

    Going forward, the likely catalysts will probably be in the form of additional contract wins and earnings accretive investments the company can net with its war chest. In the meantime, the stock remains almost comically undervalued, trading at a 28% discount to its 100% net cash backed NTA.

  • 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 verandah residences orig
  • Sysma Holdings Ltd (Update)- NTA at $0.20 per share, Net cash doubled to $0.22 per share vs share price of $0.151

    Sysma just released its financial results for the 6 months ended 31 Jan 18 this evening. Some salient points to note:

    1. Its half year profit after tax came in at $4.3 million or 1.71 cts per share. This is lower than last year’s $4.8 million but only because of the lower net write-back of provision for foreseeable losses ($0.7 million vs $2.8 million).
    2. More importantly, as we previously indicated, its completed properties on hand have substantially been sold during the financial period and converted into cash. Company is now debt free, other than <$1 million of finance leases.
    3. While NTA came in slightly lower than we expected at $50.5 million or $0.20 per share, its net cash has now more than doubled to $55.9 million from just $27.1 million 6 months back. This is equivalent to more than $0.22 per share and much more than we estimated, although not a major surprise since we had conservatively assumed an aggressive paying down of payables on hand.
    4. Only negative is that the construction order book continues to decline to $34 million as at 31 Jan 18 from $38 million 6 months prior. (Refer to our initial report for more discussion on this)

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