SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

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Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

<p><em><strong>These equity research reports are not written by the SGX.</strong> SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
<h2>BRC Asia Ltd</h2>
<p>Reinforced titan</p>
<ul>
<li>Price leadership and cost synergies (post acquisition of Lee Metal in 2018) to drive BRC’s net margin expansion from 0.7% in FY17 to 4.3% in FY21F.</li>
<li>BRC has a monopolistic grip on the supply of prefabricated steel products in Singapore, and stands to benefit from the recovery in the construction cycle.</li>
<li>Highly cash generative business with minimal capex needs, in our view; we see potential for higher dividend payout. Initiate with Add and TP of S$1.90.</li>
</ul>
<p><strong>Higher margins from stronger grip on reinforcing steel industry</strong></p>
<p>We believe the market has yet to fully appreciate BRC Asia’s strengthened position in the reinforcing steel industry, post 2018 acquisition of its key competitor (Lee Metal), which doubled its market share in rebar and mesh to 40-60% and 50-70% respectively, in terms of both value and volume. Apart from less aggressive pricing led by industry consolidation, we expect stronger procurement power and cost synergies to boost its net margins from 0.7% in FY9/17 to 4.3% in FY9/21F</p>
<p><strong>Key beneficiary of Singapore construction sector demand recovery </strong></p>
<p>According to Building Construction Authority, total construction demand in Singapore grew 14% yoy in 8M19 (2018: 23% yoy), and we expect continued roll-out of mega infrastructure projects to underpin growth over the next 3 years. Notable projects include the North-South Corridor and Changi T5 expansion. BRC is poised to benefit – it typically commands c.3% of the overall construction demand (average over past 10 years) – from a robust orderbook, which is reported to be at c.S$1.0bn at end-June 2019 (end-Mar 2019: c.S$750m). These should support our forecasted net profit CAGR of 14.7% for BRC between FY19-21F.</p>
<p><strong>Strong FCF generation could sustain higher dividend payout </strong></p>
<p>Given its strong cash generation ability and minimal capex needs of c.S$5m p.a., we forecast BRC to generate FY19-21F FCF of S$0.29-0.38/share, which, in our view, will improve its net gearing from 125% as of end-FY18 to 49% by end-FY21F, as management also plans to pare down its long-term debt. BRC’s recent adoption of dividend policy (at least 30% payout ratio and S$0.05/shr for FY19F) implies 3-4% dividend yield over FY19-21F. We see potentially higher dividend payout, with BRC’s FCF dividend coverage ratio high at 4.8x-7.5x for FY19-21F (assuming 35% payout).</p>
<p><strong>Initiate with Add rating and street-high TP of S$1.90</strong></p>
<p>We like BRC for its market leadership in Singapore’s reinforced steel industry, earnings visibility riding on the recovering home market demand, and improving balance sheet strength. Initiate coverage with an Add rating and a TP of S$1.90 based on 1.58x CY20F BVPS (Gordon growth model: ROE 13.7%, cost of equity 8.9%, 0.5% terminal growth). Re-rating catalysts include stronger-than-expected margin recovery, while downside risks include a slowdown in Singapore’s construction demand and intensifying industry competition.</p>

These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.
BRC Asia Ltd
Reinforced titan

Price leadership and cost synergies (post acquisition of Lee Metal in 2018) to drive BRC’s net margin expansion from 0.7% in FY17 to 4.3% in FY21F.
BRC has a monopolistic grip on the supply of prefabricated steel products in Singapore, and stands to benefit from the recovery in the construction cycle.
Highly cash generative business with minimal capex needs, in our view; we see potential for higher dividend payout. Initiate with Add and TP of S$1.90.

Higher margins from stronger grip on reinforcing steel industry
We believe the market has yet to fully appreciate BRC Asia’s strengthened position in the reinforcing steel industry, post 2018 acquisition of its key competitor (Lee Metal), which doubled its market share in rebar and mesh to 40-60% and 50-70% respectively, in terms of both value and volume. Apart from less aggressive pricing led by industry consolidation, we expect stronger procurement power and cost synergies to boost its net margins from 0.7% in FY9/17 to 4.3% in FY9/21F
Key beneficiary of Singapore construction sector demand recovery 
According to Building Construction Authority, total construction demand in Singapore grew 14% yoy in 8M19 (2018: 23% yoy), and we expect continued roll-out of mega infrastructure projects to underpin growth over the next 3 years. Notable projects include the North-South Corridor and Changi T5 expansion. BRC is poised to benefit – it typically commands c.3% of the overall construction demand (average over past 10 years) – from a robust orderbook, which is reported to be at c.S$1.0bn at end-June 2019 (end-Mar 2019: c.S$750m). These should support our forecasted net profit CAGR of 14.7% for BRC between FY19-21F.
Strong FCF generation could sustain higher dividend payout 
Given its strong cash generation ability and minimal capex needs of c.S$5m p.a., we forecast BRC to generate FY19-21F FCF of S$0.29-0.38/share, which, in our view, will improve its net gearing from 125% as of end-FY18 to 49% by end-FY21F, as management also plans to pare down its long-term debt. BRC’s recent adoption of dividend policy (at least 30% payout ratio and S$0.05/shr for FY19F) implies 3-4% dividend yield over FY19-21F. We see potentially higher dividend payout, with BRC’s FCF dividend coverage ratio high at 4.8x-7.5x for FY19-21F (assuming 35% payout).
Initiate with Add rating and street-high TP of S$1.90
We like BRC for its market leadership in Singapore’s reinforced steel industry, earnings visibility riding on the recovering home market demand, and improving balance sheet strength. Initiate coverage with an Add rating and a TP of S$1.90 based on 1.58x CY20F BVPS (Gordon growth model: ROE 13.7%, cost of equity 8.9%, 0.5% terminal growth). Re-rating catalysts include stronger-than-expected margin recovery, while downside risks include a slowdown in Singapore’s construction demand and intensifying industry competition.

Non-SGX Report: BRC Asia Ltd (BRC SP): Reinforced Titan

<p><i><b>These equity research reports are not written by the SGX.</b> SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</i></p><div>
<div>
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<div>
<h2>BRC Asia Ltd</h2>
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<div>
<p><strong>Reinforced titan</strong></p>
<div>
<div>
<div>
<div>
<div class="content-highlight">
<ul>
<li>
<p>Price leadership and cost synergies (post acquisition of Lee Metal in 2018) to drive BRC’s net margin expansion from 0.7% in FY17 to 4.3% in FY21F.</p>
</li>
<li>
<p>BRC has a monopolistic grip on the supply of prefabricated steel products in Singapore, and stands to benefit from the recovery in the construction cycle.</p>
</li>
<li>
<p>Highly cash generative business with minimal capex needs, in our view; we see potential for higher dividend payout. Initiate with Add and TP of S$1.90.</p>
</li>
</ul>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
<div>
<div>
<div>
<div>
<p><strong>Higher margins from stronger grip on reinforcing steel industry<br></strong>We believe the market has yet to fully appreciate BRC Asia’s strengthened position in the reinforcing steel industry, post 2018 acquisition of its key competitor (Lee Metal), which doubled its market share in rebar and mesh to 40-60% and 50-70% respectively, in terms of both value and volume. Apart from less aggressive pricing led by industry consolidation, we expect stronger procurement power and cost synergies to boost its net margins from 0.7% in FY9/17 to 4.3% in FY9/21F.</p>
<div>
<div>
<div>
<div>
<p><strong>Key beneficiary of Singapore construction sector demand recovery</strong><br>According to Building Construction Authority, total construction demand in Singapore grew 14% yoy in 8M19 (2018: 23% yoy), and we expect continued roll-out of mega infrastructure projects to underpin growth over the next 3 years. Notable projects include the North-South Corridor and Changi T5 expansion. BRC is poised to benefit – it typically commands c.3% of the overall construction demand (average over past 10 years) – from a robust orderbook, which is reported to be at c.S$1.0bn at end-June 2019 (end-Mar 2019: c.S$750m). These should support our forecasted net profit CAGR of 14.7% for BRC between FY19-21F.</p>
<div>
<div>
<div>
<div>
<p><strong>Strong FCF generation could sustain higher dividend payout</strong><br>Given its strong cash generation ability and minimal capex needs of c.S$5m p.a., we forecast BRC to generate FY19-21F FCF of S$0.29-0.38/share, which, in our view, will improve its net gearing from 125% as of end-FY18 to 49% by end-FY21F, as management also plans to pare down its long-term debt. BRC’s recent adoption of dividend policy (at least 30% payout ratio and S$0.05/shr for FY19F) implies 3-4% dividend yield over FY19-21F. We see potentially higher dividend payout, with BRC’s FCF dividend coverage ratio high at 4.8x-7.5x for FY19-21F (assuming 35% payout).</p>
<div>
<div>
<div>
<div>
<p><strong>Initiate with Add rating and street-high TP of S$1.90</strong><br>We like BRC for its market leadership in Singapore’s reinforced steel industry, earnings visibility riding on the recovering home market demand, and improving balance sheet strength. Initiate coverage with an Add rating and a TP of S$1.90 based on 1.58x CY20F BVPS (Gordon growth model: ROE 13.7%, cost of equity 8.9%, 0.5% terminal growth). Re-rating catalysts include stronger-than-expected margin recovery, while downside risks include a slowdown in Singapore’s construction demand and intensifying industry competition.</p>
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These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.



BRC Asia Ltd




Reinforced titan







Price leadership and cost synergies (post acquisition of Lee Metal in 2018) to drive BRC’s net margin expansion from 0.7% in FY17 to 4.3% in FY21F.


BRC has a monopolistic grip on the supply of prefabricated steel products in Singapore, and stands to benefit from the recovery in the construction cycle.


Highly cash generative business with minimal capex needs, in our view; we see potential for higher dividend payout. Initiate with Add and TP of S$1.90.















Higher margins from stronger grip on reinforcing steel industry We believe the market has yet to fully appreciate BRC Asia’s strengthened position in the reinforcing steel industry, post 2018 acquisition of its key competitor (Lee Metal), which doubled its market share in rebar and mesh to 40-60% and 50-70% respectively, in terms of both value and volume. Apart from less aggressive pricing led by industry consolidation, we expect stronger procurement power and cost synergies to boost its net margins from 0.7% in FY9/17 to 4.3% in FY9/21F.




Key beneficiary of Singapore construction sector demand recovery According to Building Construction Authority, total construction demand in Singapore grew 14% yoy in 8M19 (2018: 23% yoy), and we expect continued roll-out of mega infrastructure projects to underpin growth over the next 3 years. Notable projects include the North-South Corridor and Changi T5 expansion. BRC is poised to benefit – it typically commands c.3% of the overall construction demand (average over past 10 years) – from a robust orderbook, which is reported to be at c.S$1.0bn at end-June 2019 (end-Mar 2019: c.S$750m). These should support our forecasted net profit CAGR of 14.7% for BRC between FY19-21F.




Strong FCF generation could sustain higher dividend payout Given its strong cash generation ability and minimal capex needs of c.S$5m p.a., we forecast BRC to generate FY19-21F FCF of S$0.29-0.38/share, which, in our view, will improve its net gearing from 125% as of end-FY18 to 49% by end-FY21F, as management also plans to pare down its long-term debt. BRC’s recent adoption of dividend policy (at least 30% payout ratio and S$0.05/shr for FY19F) implies 3-4% dividend yield over FY19-21F. We see potentially higher dividend payout, with BRC’s FCF dividend coverage ratio high at 4.8x-7.5x for FY19-21F (assuming 35% payout).




Initiate with Add rating and street-high TP of S$1.90 We like BRC for its market leadership in Singapore’s reinforced steel industry, earnings visibility riding on the recovering home market demand, and improving balance sheet strength. Initiate coverage with an Add rating and a TP of S$1.90 based on 1.58x CY20F BVPS (Gordon growth model: ROE 13.7%, cost of equity 8.9%, 0.5% terminal growth). Re-rating catalysts include stronger-than-expected margin recovery, while downside risks include a slowdown in Singapore’s construction demand and intensifying industry competition.





















Non-SGX Report: BRC Asia Ltd: Reinforced Titan

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      <img src='https://api2.sgx.com/sites/default/files/2019-10/BRC%20Asia_0.PNG' alt='BRC Asia' />
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    <div class='content-caption'>BRC Asia</div>
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<p>Seah Kiin Peng, CEO of SGX-listed reinforcing steel fabricator BRC Asia Ltd, seeks opportunities to initiate change and influence events.<br><br>
Reminiscent of the "dreamers of dreams" in English poet Arthur O'Shaughnessy's "Ode", the 43-year-old aspires to be among "the movers and shakers of the world".<br><br>
"Management and people, dealmaking and making a difference - these are my passions," said Seah, who graduated with Bachelor and Masters of Science in Management degrees from the London School of Economics and Political Science.<br><br>
"As BRC Asia is a manufacturing entity serving the cyclical construction industry, it's a day-to-day, month-to-month, and quarter-to-quarter ride through the waves - we need to make sure our staff have good working conditions and keep their jobs, and that we're able to deliver quality products to our customers on time."<br><br>
Seah began his career in the Singapore Foreign Service before joining the shipping industry. In March 2010, he was appointed Executive Director of BRC Asia, with then-Group Managing Director Lim Siak Meng as his mentor. Eight years later, Seah was named the Group's Chief Executive Officer.<br><br>
"The purpose of my entry into BRC Asia was very clear - this was part of the Group's succession planning," he recalled. <br><br>
In the early years, Seah faced his fair share of stumbling blocks. At one point, BRC Asia's survival was called into question after Lim was hospitalised for a period of time and competitors began nipping at the company's heels. "We were fighting fires on several fronts, and many people said we wouldn't make it. But we did."<br><br>
Lim officially retired in November 2017. "By then, the team that had been nurtured over the years was ready to step into his shoes and take the business forward," Seah said.<br><br>
"Our management team now has a good mix of professional managers and shareholder representatives," he added, referring to Esteel Enterprise, which holds more than 70% of BRC Asia. Esteel - owned by You Zhenhua's Advance Venture Investments and Liu Bin's TopTip Holding - completed its takeover of the Group in September 2017.<br><br>
Incorporated in 1938 in Singapore, BRC Asia was listed on the Mainboard of Singapore Exchange in July 2000, and has a current market capitalisation of about S$320 million. In the year-to-date, the stock has generated a total return of 7.9%, compared with total returns of 5.2% and 7.2% for the benchmark Straits Times Index (STI) and broader FTSE ST All-Share Index respectively.<br><br>
The Group, which draws on more than a century of expertise in steel fabrication technology originating from Britain, designs and manufactures a range of prefabricated reinforcing steel products. Ranging from cages for beams, columns and pile caps, as well as mesh for household shelters, to heavy prefabricated beam and column reinforcement, these innovative products aim to help contractors construct "better, faster, and therefore cheaper".<br><br>
With factories in Singapore, Malaysia and China, BRC Asia caters to builders in public and private housing sectors, as well as the commercial and industrial space. A strong proponent of off-site prefabrication, the Group helps clients cut down laborious and inefficient in situ steel fixing work, allowing them to enjoy greater on-site productivity and shorter construction cycles.<br><br>
As a testament to the recognition of its brand, steel meshes in many markets are known simply as "BRC". The Group has also participated in a number of iconic projects, such as Singapore's Marina Bay Sands and Resorts World Sentosa integrated resorts, as well as the world's tallest public housing project, The Pinnacle@Duxton. </p>

<p> </p>

<p><strong>Asia Beckons </strong><br><br>
Last July, BRC Asia completed its S$200 million purchase of 100% of Lee Metal Group Ltd, a distributor, fabricator and international trader of steel products. According to analyst estimates, the acquisition is expected to have raised BRC Asia's market share to 45%-55% from about 20%-30%.<br><br>
The Group has expanded its net asset value (NAV) to nearly S$200 million prior to the Lee Metal takeover, from below S$40 million in 2006, thanks largely to the management team led by Lim. After coming on board, Seah also focused on extending the Group's reach beyond domestic shores, into Malaysia - which he started from scratch - and China. <br><br>
Now, being the largest reinforcing steel fabricator in Singapore post-acquisition, and with established operations in two overseas markets, the Group is eyeing opportunities in the rest of Asia. <br><br>
"Demand in Singapore is mature, and we need to explore new markets," he said. "We want to leverage on the resources, facilities and expertise available in Singapore, Malaysia and China to broaden and deepen our reach - our vision is to be the region's reinforcing steel powerhouse." <br><br>
With this in mind, BRC Asia has embarked on steel trading and distribution activities in Thailand and Indonesia. "Our trading and distribution platform offers good insight into these economies, and we intend to use it to venture into these markets. A lot will still depend on how ready these countries are to accept our products, and that will vary across the region."<br><br>
Apart from the risks and challenges of venturing abroad, BRC Asia is also grappling with integration pains.<br><br>
"What is most challenging about any acquisition is the people and the culture. It's extremely tough to achieve cohesiveness within a short period of time, especially when you've had no prior relationships with the people whom you are integrating with," Seah pointed out.<br><br>
"While there's no question about the Group being able to perform efficiently, to have a unified and united group - and not just at management level - takes time. This is a target we'll be working towards over the next two years."</p>

<p> </p>

<p><strong>The Next Lap</strong><br><br>
Meanwhile, the sector's improving prospects bode well for the Group. Singapore's construction sector grew 2.7% year-on-year in the third quarter of this year, extending the 2.8% and 2.7% expansion rates seen in the first two quarters of 2019, according to advance estimates released by the Ministry of Trade and Industry earlier this week.<br><br>
According to Singapore's Building and Construction Authority (BCA), domestic construction demand is expected to hold steady or edge higher this year from 2018. The value of construction contracts to be awarded in 2019 is projected to range between S$27 billion and S$32 billion, versus a preliminary estimate of S$30.5 billion awarded in 2018, BCA data showed.<br><br>
This will be driven by sustained public sector construction demand, stemming from a pipeline of major infrastructure and industrial building projects, as well as private sector activity, comprising redevelopment of en-bloc residential sales sites and new industrial developments. <br><br>
Over the medium term, Singapore's construction activity will likely continue to improve, according to BCA data. Demand is estimated to reach between S$27 billion and S$34 billion per year in 2020 and 2021, and could increase to between S$28 billion and S$35 billion per year in 2022 and 2023.<br><br>
Besides public housing developments, large government infrastructure projects will underpin demand. These include the S$9 billion expansion plan for Singapore's two integrated resorts, the Cross Island high-capacity subway line spanning east and west, a new integrated tourism development at Jurong Lake District, Changi Airport Terminal 5, and Tuas Megaport.<br><br>
"The government is embarking on the next lap of nation-building, and I would expect the next decade to be a busy one in terms of public sector construction demand," Seah added.<br><br>
The outlook for China and Malaysia also remains bright. Apart from the sheer size of the China market, steel prefabrication as a method of construction is expected to gain popularity, and enter a fast-growing phase because of the government-led, nationwide push for green construction. According to industry estimates, the country's steel prefab market could grow at a compound annual rate of 14%-24% between 2018 and 2020.<br><br>
Meanwhile, the Malaysian construction sector is expected to register a CAGR of 4.7% between 2019 and 2024, according to data from Mordor Intelligence. The sector had averaged a 7.9% annual growth rate from 2010 to 2016, underpinned by government infrastructure investments under the 10th Malaysia Plan 2011-2015.<br><br>
As at 30 June 2019, BRC Asia's order book stood at about S$1 billion. The duration of its projects may span up to five years.<br>
 </p>

<p><strong>No Lip Service</strong><br><br>
Industry prospects aside, Seah is also focused on customer experience. "Servicing clients tends to keep me up at night quite a bit," he admitted.<br><br>
Reflecting the Group's commitment to efficient, timely deliveries and customer satisfaction, individual chat groups are created for each major project. "My name in the chat group tells the contractor that we are not a company that pays lip service to customer support," he said.<br><br>
And when Seah is not consumed by the Group's day-to-day operations, he can be found with his children - two boys and a girl, aged six, eight and 10. "It doesn't really matter what we do, it can be something inane like me nagging them or chauffeuring them from place to place. But when kids need help or advice, the person they turn to is the one they've spent time with."<br><br>
For him, a source of good counsel is the lyrics of "Everybody's Free (To Wear Sunscreen)", a spoken-word track known as The Sunscreen Song, released in 1999 by Australian writer, director and producer Baz Luhrmann. <br><br>
"This song is full of truisms," Seah grinned, referring to lyrics like "You will not understand the power and beauty of your youth / Until they have faded, but trust me, in 20 years, you'll look back / At photos of yourself and recall in a way you can't grasp now / How much possibility lay before you and how fabulous you really looked".<br><br>
The ditty also champions the axiom that fretting over the future is useless: "Don't worry about the future / Or worry, but know that worrying is as effective as trying to solve an algebra equation by chewing bubble gum".<br><br>
Instead, the song recommends you "Do the one thing every day that scares you". This can-do attitude is one of Seah's touchstones. "Before you embark on something, think it through. But once you've decided, stop hesitating and take the leap," he said.<br><br>
"If you're always saying 'No' and "Can't', you'll never succeed. Don't be afraid - just try!"</p>

<p><br><strong>BRC Asia Ltd</strong></p>

<p>Incorporated in 1938 and listed on SGX Mainboard, BRC Asia is a leading solutions provider for prefabricated reinforcing steel, offering products such as 12m standard length rebar, standard and customised welded wire mesh, as well as cut and bend services for rebar and prefabrication service. Through the use of off-site prefab technology, BRC Asia helps customers cut down on laborious and inefficient in-situ steel fixing work, resulting in increased on-site productivity and consequently, shorter construction cycles. The Group currently employs more than 1,000 people in Singapore, Malaysia and China. <br><br>
The company website is: <a href="http://edm.sgx.com/a/hBdqRypB86%24MfB9z79OAABR54OZ/link8"><strong>www.brc.com.sg</strong></a>.<br><br>
Click <a href="http://edm.sgx.com/a/hBdqRypB86%24MfB9z79OAABR54OZ/link9"><strong>here</strong></a> for the company's StockFacts page.<br><br>
For the three months ended 30 June 2019 financial results, click <a href="http://edm.sgx.com/a/hBdqRypB86%24MfB9z79OAABR54OZ/link10"><strong>here</strong></a>.</p>

<p><br><br><strong>About kopi-C: the Company brew</strong></p>

<p><strong>Text: Jennifer LH Tan</strong><br><strong>Photo: Company file</strong><br><br><em>kopi-C </em>is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.<br><br>
For previous editions of <em>kopi-C: the Company brew,</em> please click <strong><a href="http://edm.sgx.com/a/hBdqRypB86%24MfB9z79OAABR54OZ/link11">here</a></strong>.  <br><br>
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to <strong><a href="mailto:jennifer.tan@sgx.com">jennifer.tan@sgx.com</a></strong>.</p>
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    BRC Asia


Seah Kiin Peng, CEO of SGX-listed reinforcing steel fabricator BRC Asia Ltd, seeks opportunities to initiate change and influence events.  
Reminiscent of the "dreamers of dreams" in English poet Arthur O'Shaughnessy's "Ode", the 43-year-old aspires to be among "the movers and shakers of the world".  
"Management and people, dealmaking and making a difference - these are my passions," said Seah, who graduated with Bachelor and Masters of Science in Management degrees from the London School of Economics and Political Science.  
"As BRC Asia is a manufacturing entity serving the cyclical construction industry, it's a day-to-day, month-to-month, and quarter-to-quarter ride through the waves - we need to make sure our staff have good working conditions and keep their jobs, and that we're able to deliver quality products to our customers on time."  
Seah began his career in the Singapore Foreign Service before joining the shipping industry. In March 2010, he was appointed Executive Director of BRC Asia, with then-Group Managing Director Lim Siak Meng as his mentor. Eight years later, Seah was named the Group's Chief Executive Officer.  
"The purpose of my entry into BRC Asia was very clear - this was part of the Group's succession planning," he recalled.   
In the early years, Seah faced his fair share of stumbling blocks. At one point, BRC Asia's survival was called into question after Lim was hospitalised for a period of time and competitors began nipping at the company's heels. "We were fighting fires on several fronts, and many people said we wouldn't make it. But we did."  
Lim officially retired in November 2017. "By then, the team that had been nurtured over the years was ready to step into his shoes and take the business forward," Seah said.  
"Our management team now has a good mix of professional managers and shareholder representatives," he added, referring to Esteel Enterprise, which holds more than 70% of BRC Asia. Esteel - owned by You Zhenhua's Advance Venture Investments and Liu Bin's TopTip Holding - completed its takeover of the Group in September 2017.  
Incorporated in 1938 in Singapore, BRC Asia was listed on the Mainboard of Singapore Exchange in July 2000, and has a current market capitalisation of about S$320 million. In the year-to-date, the stock has generated a total return of 7.9%, compared with total returns of 5.2% and 7.2% for the benchmark Straits Times Index (STI) and broader FTSE ST All-Share Index respectively.  
The Group, which draws on more than a century of expertise in steel fabrication technology originating from Britain, designs and manufactures a range of prefabricated reinforcing steel products. Ranging from cages for beams, columns and pile caps, as well as mesh for household shelters, to heavy prefabricated beam and column reinforcement, these innovative products aim to help contractors construct "better, faster, and therefore cheaper".  
With factories in Singapore, Malaysia and China, BRC Asia caters to builders in public and private housing sectors, as well as the commercial and industrial space. A strong proponent of off-site prefabrication, the Group helps clients cut down laborious and inefficient in situ steel fixing work, allowing them to enjoy greater on-site productivity and shorter construction cycles.  
As a testament to the recognition of its brand, steel meshes in many markets are known simply as "BRC". The Group has also participated in a number of iconic projects, such as Singapore's Marina Bay Sands and Resorts World Sentosa integrated resorts, as well as the world's tallest public housing project, The Pinnacle@Duxton. 

 

Asia Beckons   
Last July, BRC Asia completed its S$200 million purchase of 100% of Lee Metal Group Ltd, a distributor, fabricator and international trader of steel products. According to analyst estimates, the acquisition is expected to have raised BRC Asia's market share to 45%-55% from about 20%-30%.  
The Group has expanded its net asset value (NAV) to nearly S$200 million prior to the Lee Metal takeover, from below S$40 million in 2006, thanks largely to the management team led by Lim. After coming on board, Seah also focused on extending the Group's reach beyond domestic shores, into Malaysia - which he started from scratch - and China.   
Now, being the largest reinforcing steel fabricator in Singapore post-acquisition, and with established operations in two overseas markets, the Group is eyeing opportunities in the rest of Asia.   
"Demand in Singapore is mature, and we need to explore new markets," he said. "We want to leverage on the resources, facilities and expertise available in Singapore, Malaysia and China to broaden and deepen our reach - our vision is to be the region's reinforcing steel powerhouse."   
With this in mind, BRC Asia has embarked on steel trading and distribution activities in Thailand and Indonesia. "Our trading and distribution platform offers good insight into these economies, and we intend to use it to venture into these markets. A lot will still depend on how ready these countries are to accept our products, and that will vary across the region."  
Apart from the risks and challenges of venturing abroad, BRC Asia is also grappling with integration pains.  
"What is most challenging about any acquisition is the people and the culture. It's extremely tough to achieve cohesiveness within a short period of time, especially when you've had no prior relationships with the people whom you are integrating with," Seah pointed out.  
"While there's no question about the Group being able to perform efficiently, to have a unified and united group - and not just at management level - takes time. This is a target we'll be working towards over the next two years."

 

The Next Lap  
Meanwhile, the sector's improving prospects bode well for the Group. Singapore's construction sector grew 2.7% year-on-year in the third quarter of this year, extending the 2.8% and 2.7% expansion rates seen in the first two quarters of 2019, according to advance estimates released by the Ministry of Trade and Industry earlier this week.  
According to Singapore's Building and Construction Authority (BCA), domestic construction demand is expected to hold steady or edge higher this year from 2018. The value of construction contracts to be awarded in 2019 is projected to range between S$27 billion and S$32 billion, versus a preliminary estimate of S$30.5 billion awarded in 2018, BCA data showed.  
This will be driven by sustained public sector construction demand, stemming from a pipeline of major infrastructure and industrial building projects, as well as private sector activity, comprising redevelopment of en-bloc residential sales sites and new industrial developments.   
Over the medium term, Singapore's construction activity will likely continue to improve, according to BCA data. Demand is estimated to reach between S$27 billion and S$34 billion per year in 2020 and 2021, and could increase to between S$28 billion and S$35 billion per year in 2022 and 2023.  
Besides public housing developments, large government infrastructure projects will underpin demand. These include the S$9 billion expansion plan for Singapore's two integrated resorts, the Cross Island high-capacity subway line spanning east and west, a new integrated tourism development at Jurong Lake District, Changi Airport Terminal 5, and Tuas Megaport.  
"The government is embarking on the next lap of nation-building, and I would expect the next decade to be a busy one in terms of public sector construction demand," Seah added.  
The outlook for China and Malaysia also remains bright. Apart from the sheer size of the China market, steel prefabrication as a method of construction is expected to gain popularity, and enter a fast-growing phase because of the government-led, nationwide push for green construction. According to industry estimates, the country's steel prefab market could grow at a compound annual rate of 14%-24% between 2018 and 2020.  
Meanwhile, the Malaysian construction sector is expected to register a CAGR of 4.7% between 2019 and 2024, according to data from Mordor Intelligence. The sector had averaged a 7.9% annual growth rate from 2010 to 2016, underpinned by government infrastructure investments under the 10th Malaysia Plan 2011-2015.  
As at 30 June 2019, BRC Asia's order book stood at about S$1 billion. The duration of its projects may span up to five years. 
 

No Lip Service  
Industry prospects aside, Seah is also focused on customer experience. "Servicing clients tends to keep me up at night quite a bit," he admitted.  
Reflecting the Group's commitment to efficient, timely deliveries and customer satisfaction, individual chat groups are created for each major project. "My name in the chat group tells the contractor that we are not a company that pays lip service to customer support," he said.  
And when Seah is not consumed by the Group's day-to-day operations, he can be found with his children - two boys and a girl, aged six, eight and 10. "It doesn't really matter what we do, it can be something inane like me nagging them or chauffeuring them from place to place. But when kids need help or advice, the person they turn to is the one they've spent time with."  
For him, a source of good counsel is the lyrics of "Everybody's Free (To Wear Sunscreen)", a spoken-word track known as The Sunscreen Song, released in 1999 by Australian writer, director and producer Baz Luhrmann.   
"This song is full of truisms," Seah grinned, referring to lyrics like "You will not understand the power and beauty of your youth / Until they have faded, but trust me, in 20 years, you'll look back / At photos of yourself and recall in a way you can't grasp now / How much possibility lay before you and how fabulous you really looked".  
The ditty also champions the axiom that fretting over the future is useless: "Don't worry about the future / Or worry, but know that worrying is as effective as trying to solve an algebra equation by chewing bubble gum".  
Instead, the song recommends you "Do the one thing every day that scares you". This can-do attitude is one of Seah's touchstones. "Before you embark on something, think it through. But once you've decided, stop hesitating and take the leap," he said.  
"If you're always saying 'No' and "Can't', you'll never succeed. Don't be afraid - just try!"

 BRC Asia Ltd

Incorporated in 1938 and listed on SGX Mainboard, BRC Asia is a leading solutions provider for prefabricated reinforcing steel, offering products such as 12m standard length rebar, standard and customised welded wire mesh, as well as cut and bend services for rebar and prefabrication service. Through the use of off-site prefab technology, BRC Asia helps customers cut down on laborious and inefficient in-situ steel fixing work, resulting in increased on-site productivity and consequently, shorter construction cycles. The Group currently employs more than 1,000 people in Singapore, Malaysia and China.   
The company website is: www.brc.com.sg.  
Click here for the company's StockFacts page.  
For the three months ended 30 June 2019 financial results, click here.

  About kopi-C: the Company brew

Text: Jennifer LH Tan Photo: Company file  kopi-C is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.  
For previous editions of kopi-C: the Company brew, please click here.    
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to jennifer.tan@sgx.com.



BRC Asia: Forging a Reinforcing Steel Powerhouse 

<p><i><b>These equity research reports are not written by the SGX.</b> SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</i></p><p>SMALL/MID CAP HIGHLIGHTS</p>
<h2>BRC Asia (BRC SP)</h2>
<p>3QFY19: Solid Earnings With Robust Prospects</p>
<p><strong>BRC reported 3QFY19 net profit of S$9.1m (+70.6% qoq), in line with expectations. Operating margins have improved and the group looks set to reap the benefits from its acquisition of Lee Metal. As the market leader in construction steel products, we think that BRC is a strong proxy for the upcycle in the industry and will benefit from the slew of mega projects lined up in Singapore. Maintain BUY and target price of S$1.75.</strong></p>
<p>RESULTS</p>
<ul>
<li><strong>3QFY19 net profit of S$9.1m, robust profit growth from acquisition.</strong> <br>BRC Asia (BRC) reported 3QFY19 net profit of S$9.1m, compared with a loss of S$6.8m in 3QFY18. Revenue for 3QFY19 was up 44% yoy. On a 9MFY19 basis, net profit of S$20.7m represents 69% of our full-year estimates, in line with our expectations.</li>
<li>
<p><strong>Operating margin rising, benefitting from synergies of Lee Metal acquisition.</strong> <br>For 3QFY19, operating margin was 5.2% (+2.4ppt qoq), with gross margins improving to 11.8% (6.1% in 2QFY19) and showing a huge improvement yoy. The higher gross margin can be attributed to a higher volume of value-added sales tonnage delivered and cost synergies from bulk raw material purchases. Administrative expense was flat yoy in 9MFY19, while BRC’s acquisition of Lee Metal (conducted in Jul 18) is starting to see benefits and we expect synergies to be achieved given the larger procurement and increased efficiency from the integration of factories and processes</p>
</li>
<li>
<p><strong>Orderbook strengthened.</strong><br>According BRC, its orderbook for 3QFY19 stands at about S$1b. This is higher compared with 2QFY19’s S$750m. The duration of projects in the orderbook may be up to five years.</p>
</li>
</ul>

These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.SMALL/MID CAP HIGHLIGHTS
BRC Asia (BRC SP)
3QFY19: Solid Earnings With Robust Prospects
BRC reported 3QFY19 net profit of S$9.1m (+70.6% qoq), in line with expectations. Operating margins have improved and the group looks set to reap the benefits from its acquisition of Lee Metal. As the market leader in construction steel products, we think that BRC is a strong proxy for the upcycle in the industry and will benefit from the slew of mega projects lined up in Singapore. Maintain BUY and target price of S$1.75.
RESULTS

3QFY19 net profit of S$9.1m, robust profit growth from acquisition.  BRC Asia (BRC) reported 3QFY19 net profit of S$9.1m, compared with a loss of S$6.8m in 3QFY18. Revenue for 3QFY19 was up 44% yoy. On a 9MFY19 basis, net profit of S$20.7m represents 69% of our full-year estimates, in line with our expectations.

Operating margin rising, benefitting from synergies of Lee Metal acquisition.  For 3QFY19, operating margin was 5.2% (+2.4ppt qoq), with gross margins improving to 11.8% (6.1% in 2QFY19) and showing a huge improvement yoy. The higher gross margin can be attributed to a higher volume of value-added sales tonnage delivered and cost synergies from bulk raw material purchases. Administrative expense was flat yoy in 9MFY19, while BRC’s acquisition of Lee Metal (conducted in Jul 18) is starting to see benefits and we expect synergies to be achieved given the larger procurement and increased efficiency from the integration of factories and processes


Orderbook strengthened. According BRC, its orderbook for 3QFY19 stands at about S$1b. This is higher compared with 2QFY19’s S$750m. The duration of projects in the orderbook may be up to five years.



Non-SGX Report: BRC Asia (BRC SP): 3QFY19: Solid Earnings With Robust Prospects

<p><em><strong>These equity research reports are not written by the SGX.</strong> SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
<div>
<div>
<div>
<p>SMALL/MID CAP HIGHLIGHTS</p>
<div>
<div>
<div>
<h2>BRC Asia (BRC SP)</h2>
<div>
<div>
<div>
<p><strong>3QFY19: Solid Earnings With Robust Prospects</strong></p>
</div>
</div>
</div>
</div>
<div>
<div>
<div>
<p><strong>BRC reported 3QFY19 net profit of S$9.1m (+70.6% qoq), in line with expectations. Operating margins have improved and the group looks set to reap the benefits from its acquisition of Lee Metal. As the market leader in construction steel products, we think that BRC is a strong proxy for the upcycle in the industry and will benefit from the slew of mega projects lined up in Singapore. Maintain BUY and target price of S$1.75.</strong></p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/132/893/original/image_43263707821589248443028.png?1589248447" class="editor-image img-responsive" data-smartkarma-image-id="132893"></figure>
<div>
<div>
<div>
<p>RESULTS</p>
<div>
<div>
<div>
<p><strong>3QFY19 net profit of S$9.1m, robust profit growth from acquisition.</strong> BRC Asia (BRC) reported 3QFY19 net profit of S$9.1m, compared with a loss of S$6.8m in 3QFY18. Revenue for 3QFY19 was up 44% yoy. On a 9MFY19 basis, net profit of S$20.7m represents 69% of our full-year estimates, in line with our expectations.</p>
<div>
<div>
<div>
<p><strong>Operating margin rising, benefitting from synergies of Lee Metal acquisition</strong>. For 3QFY19, operating margin was 5.2% (+2.4ppt qoq), with gross margins improving to 11.8% (6.1% in 2QFY19) and showing a huge improvement yoy. The higher gross margin can be attributed to a higher volume of value-added sales tonnage delivered and cost synergies from bulk raw material purchases. Administrative expense was flat yoy in 9MFY19, while BRC’s acquisition of Lee Metal (conducted in Jul 18) is starting to see benefits and we expect synergies to be achieved given the larger procurement and increased efficiency from the integration of factories and processes</p>
<div>
<div>
<div>
<p><strong>Orderbook strengthened.</strong> According BRC, its orderbook for 3QFY19 stands at about S$1b. This is higher compared with 2QFY19’s S$750m. The duration of projects in the orderbook may be up to five years.</p>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
</div>

These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.



SMALL/MID CAP HIGHLIGHTS



BRC Asia (BRC SP)



3QFY19: Solid Earnings With Robust Prospects







BRC reported 3QFY19 net profit of S$9.1m (+70.6% qoq), in line with expectations. Operating margins have improved and the group looks set to reap the benefits from its acquisition of Lee Metal. As the market leader in construction steel products, we think that BRC is a strong proxy for the upcycle in the industry and will benefit from the slew of mega projects lined up in Singapore. Maintain BUY and target price of S$1.75.




RESULTS



3QFY19 net profit of S$9.1m, robust profit growth from acquisition. BRC Asia (BRC) reported 3QFY19 net profit of S$9.1m, compared with a loss of S$6.8m in 3QFY18. Revenue for 3QFY19 was up 44% yoy. On a 9MFY19 basis, net profit of S$20.7m represents 69% of our full-year estimates, in line with our expectations.



Operating margin rising, benefitting from synergies of Lee Metal acquisition. For 3QFY19, operating margin was 5.2% (+2.4ppt qoq), with gross margins improving to 11.8% (6.1% in 2QFY19) and showing a huge improvement yoy. The higher gross margin can be attributed to a higher volume of value-added sales tonnage delivered and cost synergies from bulk raw material purchases. Administrative expense was flat yoy in 9MFY19, while BRC’s acquisition of Lee Metal (conducted in Jul 18) is starting to see benefits and we expect synergies to be achieved given the larger procurement and increased efficiency from the integration of factories and processes



Orderbook strengthened. According BRC, its orderbook for 3QFY19 stands at about S$1b. This is higher compared with 2QFY19’s S$750m. The duration of projects in the orderbook may be up to five years.





















Singapore

BRC Asia is a leading Pan-Asia prefabricated reinforcing steel solutions provider. The company offers a full suite of reinforcing steel products and services, including standard length rebar, cut and bend services, prefabrication services, and standard and customized welded wire mesh for the building and construction industry. BRC Asia is headquartered in Singapore and was incorporated in 1938.

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Singapore Exchange Ltd (SGX)

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Singapore Exchange Ltd (SGX)

Non-SGX Report: BRC Asia (BRC SP): 3QFY19: Solid Earnings With Robust Prospects

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