(LINASC SP / BFT.SI)
Record FY26 results and S$70m contract extend growth runway
Construction
Revenue increased 75.8% YoY to S$129.5mn, 23.9% above our initiation forecast, as Lincotrade converted its order book faster than expected. PATMI more than tripled to S$8.1mn and was 22.4% ahead of our forecast. However, group gross margin declined from 15.0% in 1H26 to 12.2% in 2H26 despite higher revenue, indicating that the earnings beat was principally volume driven.
Contract assets increased 203.7% to S$22.4mn and total trade and other receivables rose 63.2% to S$28.4mn. Consequently, S$12.4mn of operating cash flow before working-capital movements was converted into a S$2.3mn operating cash outflow. Bills payable increased to S$26.2mn to fund the higher level of project activity. Cash conversion is now the principal financial issue.
Lincotrade’s order book stood at S$106.2mn at 30 June 2026. The subsequent S$70.0mn educational-institution contract lifts the illustrative pro-forma order book to approximately S$176.2mn. The contract commenced on 1 August 2026 and runs for approximately 54 months, providing a multi-year revenue anchor rather than a one-year earnings uplift.
We maintain our OUTPERFORM and raise our 12-month target price to S$0.511 from S$0.366. Our target price is based on a DCF valuation using an 11.29% WACC and 2.0% terminal growth rate. The increase reflects the stronger-than-expected FY26 results, higher earnings forecasts and improved revenue visibility following the S$70.0mn contract award.
Key downside risks include (i) project execution and revenue recognition delays; (ii) working-capital and cash conversion risk; (iii) fixed-price contract exposure to cost inflation; (iv) subcontractor and foreign-worker availability risk; (v) data centre execution risk; and (vi) order-book replenishment risk.
