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Broker's take: CIMB initiates coverage on Yongnam, recommends 'add'

CIMB is recommending to "add" Yongnam Holdings upon initial coverage of the steel supplier, with a target price of 53 Singapore cents.

The stock has been on a tear, climbing to a six-month high of 33 Singapore cents as at 9.48am on Oct 26, up 8.2 per cent or 2.5 Singapore cents.

Contract wins for major projects in Singapore are key drivers for Yongnam's stock, says CIMB, as well as holding major strut and steel plate assets worth S$242 million as at end-fiscal 2016.

The broker says Yongnam intends to tender for S$1.16 billion worth of projects for 2017-18, including one worth around S$500 million for the new North-South Corridor expressway. Yongnam is partnering SK E&C to bid for the main contractor package.

CIMB says the company's losses in fiscal 2017 could be reversed in fiscal 2018 to an estimated net profit of S$10 million, based on projects in tender and a 50 per cent "hit rate".

sentifi.com

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