Lum Chang Holdings was founded in the 1940s by Mr Lum Chang, a pioneer in Singapore’s construction industry, and was listed on the Singapore Exchange in 1984. L.C Development, which was previously a listed subsidiary with interests in hotels and serviced residences globally, was demerged in October 2005. Today, Lum Chang Holdings’ main business is that of construction in Singapore (approximately 90% of profits), while it also has property development interests in Singapore and Malaysia.

With its experience, the Group is amongst a handful of local-owned firms with the capability to handle large-scale civil and infrastructure projects on its own. Such projects are typically more technically challenging than residential projects. As a testament to this, Lum Chang completed the $213m DTSS_Pumping Station project at the Changi Water Reclamation Plant, winning the BCA Construction Excellence Award in May 08. It was also recently awarded a six-year $452.4m contract from the LTA to build the new Downtown Line 2 MRT Station at Bukit Panjang.

We estimate Lum Chang to have a construction net orderbook of about $700m as at FY09 (June Yr End) of which $500m relates to MRT projects to be recognized over the next 5-6 years. While the remaining $200m work relating to commercial and residential projects will be recognized over the next 12 months, management is optimistic that they can easily renew this orderbook, given their track record.

While the Group will reap some profits from the sale of its remaining four units of Swettenham Luxury Bungalows, we expect Malaysia to provide the excitement going forward. The Group has teamed up with a strong JV partner to develop 3 residential projects in Kuala Lumpur. In various stages of construction and launches, current market prices mean these will start yielding profits going forward.

Even without taking into account the expected profitability over the next few years, the Group is currently only trading at 1X P/B. Under its assets, $20.6m is net cash, while another $39.5m is the cost value of the Swettenham Bungalows which is below market price at the moment. We also note that all its trade and receivables are from government bodies/ blue-chip clients where we do not foresee any collection issues. The Group has paid steady dividend of at least 1 cent net per share since 1997.