Latest / Investor Exchange / Why Singapore’s $44 Billion Construction Boom Starts With This Under-the-Radar Powerhouse

Transcript

Why Singapore’s $44 Billion Construction Boom Starts With This Under-the-Radar Powerhouse · Investor Exchange

• 0:02
  At Investor Exchange, it's time for another podcast with your hosts, David and Brenda.
• 0:08
  Welcome to The Debate. Today, we're digging into the literal foundation of Singapore's
• 0:14
  infrastructure boom, a company called Reclaims Global.
• 0:17
  They're in earthworks and waste management, so they sit right at the very start
• 0:20
  of the construction supply chain. And the central question is,
• 0:23
  well, pretty straightforward.
• 0:25
  Is Reclaims an undervalued cash-rich operator that's just perfectly timed for
• 0:30
  this construction upcycle?
• 0:32
  Or is it more of a small cap trap where, you know, the really explosive growth
• 0:36
  is already in the rearview mirror?
• 0:38
  Exactly. I'm arguing that this is a top-tier operator with a pristine balance
• 0:42
  sheet, and it's trading at what I see as an unjustified discount.
• 0:46
  And I'm taking the more skeptical view here. Even with a clean balance sheet,
• 0:50
  I see a company with a transparency problem when it comes to its future workload.
• 0:54
  The numbers suggest the hyper-growth phase is over, and I think the market is right to be cautious.
• 0:59
  Okay, so let's start with the bull case.
• 1:02
  Reclaims Global is a classic picks-and-shovels play.
• 1:06
  In 2024, industry demand hit S44.2 billion dollars.
• 1:11
  You literally cannot build anything in Singapore without moving earth first.
• 1:14
  And Reclaims is a top-three player in this niche.
• 1:17
  Financially, they are solid as a rock. They're sitting on a net cash position
• 1:21
  of $18.5 million, which is massive for a company with a market cap of only $61 million.
• 1:28
  Plus, they're generating a return on equity of around 17%.
• 1:32
  They are profitable, they're liquid, and they're essential. Essential, perhaps.
• 1:36
  But let's look at the trajectory. You talk about growth, but what I see is a massive deceleration.
• 1:43
  In 2025, sure, turnover grew by an incredible 82.7%. But the forecasts?
• 1:49
  They suggest this is going to plummet to around 9% annually through 2028.
• 1:55
  I mean, that's a hard landing. Investors buying in now aren't getting that historic
• 2:00
  80% growth. They're buying a single-digit growth story, and one that's heavily,
• 2:05
  heavily reliant on government infrastructure timelines.
• 2:08
  If just one big project gets delayed, that 9% could, well, they could easily vanish.
• 2:14
  I think you're confusing stabilization with stagnation.
• 2:18
  We're moving from a chaotic post-pandemic boom to a more sustainable level of production.
• 2:24
  And look at the first half of fiscal year 2026.
• 2:28
  Revenue was still up 14.9% year-on-year.
• 2:32
  And crucially, 75% of their revenue comes from long-term projects.
• 2:37
  That isn't volatility. That is earnings visibility.
• 2:41
  They just secured another S15.5 million dollar contract back in November.
• 2:46
  The machine is still running.
• 2:48
  Mm-hmm. But how much fuel is left in the tank? That's the problem.
• 2:52
  The report itself explicitly states that Reclaims does not disclose a formal order book.
• 2:58
  For a construction-related stock, the order book is your crystal ball.
• 3:02
  Without it, you're flying blind. You can cite a contract win here and a revenue
• 3:07
  bump there as, you know, proof of momentum.
• 3:09
  But without a disclosed backlog, investors are just relying on proxy indicators, not hard data.
• 3:15
  You're asking people to invest on faith, not analysis. Well,
• 3:19
  I'd argue the valuation offers a margin of safety that more than compensates for that opacity.
• 3:25
  Reclaims is trading in a price-to-earnings ratio, a PE, of roughly 8.7 times for fiscal year 2027.
• 3:32
  That is significantly cheaper than the industry average. You're paying less
• 3:36
  for every dollar of earnings.
• 3:37
  You combine that with a dividend yield of roughly 5% and that huge cash pile
• 3:42
  we already talked about.
• 3:44
  I mean, the analyst target price of S$56 implies something like a 38% upside.
• 3:49
  You're literally being paid a 5% yield to wait for the market to wake up.
• 3:52
  Cheapness can be a trap. Let's talk efficiency for a second.
• 3:56
  Compare reclaims to a peer, like SoilBuild construction.
• 3:59
  SoilBuild boasts a return on equity, so essentially how efficiently they use
• 4:03
  shareholder money, of 41.8%.
• 4:06
  Reclaims is at 17.5%. The market pays a premium for soil build because they're
• 4:11
  generating more than double the return on every single dollar of equity.
• 4:15
  So why should Reclaims command a higher multiple when its engine is,
• 4:18
  frankly, half as efficient?
• 4:20
  Because Reclaims is gearing up to close that gap.
• 4:23
  In October 2025, they completed a placement raising S7.8 million dollars from investors.
• 4:29
  This was their first cash raise since their IPO.
• 4:32
  They aren't just hoarding that cash, They're deploying it to capture the massive
• 4:36
  Tuas Megaport and Changi T5 projects.
• 4:39
  They are sacrificing some of those short-term efficiency metrics to build capacity
• 4:43
  for the next decade of infrastructure work.
• 4:45
  But that placement just highlights the risk, doesn't it? They diluted existing
• 4:49
  shareholders to raise that cash.
• 4:51
  Now, if the Tuas or Changi projects face bureaucratic delays,
• 4:55
  which is, let's be honest, common in public sector work, that capital just sits
• 5:00
  there idle. So you've diluted your investors for growth that might not even
• 5:04
  materialize on schedule.
• 5:05
  You're betting that the market hasn't already priced in these mega projects,
• 5:09
  and I am just not sure that's a safe bet to make.
• 5:12
  So to wrap up, I see a financially disciplined company that is trading at a clear discount.
• 5:18
  Reclaims has a net cash safety net, a strong yield, and it's the physical starting
• 5:23
  point for Singapore's entire next infrastructure wave.
• 5:26
  It's a value play in a growth sector. And I see a company where the best growth numbers are in the past.
• 5:33
  The lack of a visible order book and that massive drop-off in projected growth
• 5:38
  rates makes this a show-me story.
• 5:41
  I need to see a lot more transparency before I'm willing to buy into that potential upside.
• 5:47
  It seems we're looking at a company pivoting from hyper-growth to a state of
• 5:51
  maturity, and the market hasn't quite decided how to price it yet.
• 5:54
  There is certainly more to explore in the numbers.
• 5:56
  And that does it for this edition of The Debate. Thank you.