KUALA LUMPUR: Southern Score Builders Bhd's earnings is expected to grow steadily backed by its strong balance sheet and robust order book, said Kenanga Research.
Southern Score commands strong margins by outsourcing construction work to reliable subcontractors, and procuring building materials in bulk (and often in cash terms) at highly competitive rates, the firm added.
The company came into being in November 2022 via the reverse takeover (RTO) of G Neptune Bhd by privately-wned Class G7 contractor Southern Score Sdn Bhd with a profit guarantee of RM80 million over 2022-2024.
Southern Score focuses mainly on high-rise residential building jobs in Kuala Lumpur, and civil works i.e. road and drainage, and water reticulation and sewerage package works.
Kenanga Research said an outstanding orderbook of RM638.5 million should keep this lean construction outfit busy over the next two to three years.
"We project a financial year 2023 (FY23)/FY24/FY25 net profit of RM31.4 million/RM38.3 million/RM42.4 million.
"It has a strong balance sheet with only RM5.0 million bank overdraft against RM114.5 million cash, partly thanks to RM108.6 million raised from a private placement of new shares during the RTO," it said.
Southern Score registered a strong gross margin of circa 20 per cent over FY19-FY21 and post the RTO, 19 to 24 per cent between the first quarter (Q1) FY23 and Q3 FY23.
Kenanga Research said this was primarily due to Southern Score's asset-light construction management model.
"It outsources construction work to reliable subcontractors at highly competitive rates.
"The procurement of building materials in bulk (and often in cash terms) backed by its strong balance sheet puts it in a strong position to ask for significant discounts from suppliers.
"We value the company at 22 sen with an Add rating," it added.