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Soilbuild warrants - leveraged play on construction sector

09 October 17 | The Business Times

THE property market looks like it's picking up steam with the number of en bloc deals that are being struck. On Thursday for example came news that Amber Park has been sold en bloc and on Friday, it was Normanton Park. This then begs the interesting issue of whether the flow-through will benefit construction firms. If so, then casting our eye on the construction sector for interesting, long-dated warrants, we come across Soilbuild Construction Group, which has warrants in issue.

The company on its website says that its subsidiary, Soil-Build Pte Ltd is, A1-graded under CW01 (General Building) and A2-graded under CW02 (Civil engineering) by the Building and Construction Authority (BCA)''.

The A1 grading under CW01 allows us to tender for public sector projects in Singapore of unlimited contract value, while the A2 grading under CW02 allows us to tender for public sector civil engineering projects valued up to S$90 million,'' said the company.

It added that on-going projects in Singapore include five public housing projects with HDB in Ang Mo Kio, Yishun, Sembawang, Bukit Batok and Tampines/Paya Lebar Way, two civil works projects with Land Transport Authority, a multiple-user general industrial development at Jalan Lam Huat, a commercial development at Jalan Besar and a residential flat development at Balmoral Road.

The Soilbuild warrant expires in July 2021 so there is plenty of time left. It carries an exercise price of S$0.18 which when compared to the shares at S$0.187 means they are at-the-money''.

Their intrinsic value is S$0.007, so given the warrant's last done price of S$0.026, the conversion premium is 10.2 per cent whilst the gearing is 7.2. Both these numbers are attractive by any standards, so we'd have to conclude that the Soilbuild warrant certainly demands a look.