UOBKH initiates coverage on Lum Chang Creations with “buy” call on strong growth outlook

[SINGAPORE] UOB Kay Hian (UOBKH) has initiated coverage on Lum Chang Creations (LCC), assigning the interior fit-out business a “buy” call and a S$0.39 price target on Monday (Jul 21), the day it debuted on the Singapore Exchange’s Catalist board.

The price target represents an upside of 56 per cent from LCC’s initial public offering (IPO) price of S$0.25 a share and of 27.9 per cent from its Monday closing price of S$0.305.

UOBKH analyst Heidi Mo wrote in a Monday report that LCC is set for robust financial performance, given a strong growth outlook and visible pipeline of projects.

“Backed by a robust orderbook of S$123 million, the company’s earnings per share is expected to grow remarkably at 144 per cent and 12 per cent in FY2025 and FY2026 (respectively), driven by higher demand from conservation and interior fit-out works from the government’s increasing commitment to protecting local heritage,” Mo wrote.

Contracts worth around S$34 million awarded in the first five months of 2025 will likely be fulfilled in the next three months to two years, she said. LCC’s orderbook is expected to grow further to S$146 million in FY2027, reflecting a “positive outlook”.

“Furthermore, LCC has committed to paying out not less than 30 per cent of its net profit after tax attributable to shareholders in … FY2025 and FY2026, implying a decent 4.9 per cent dividend yield for shareholders in FY2026,” Mo wrote.  

Tailwinds on urban revitalisation specialist industry outlook

LCC looks set for “robust earnings growth”, driven by a positive outlook for the urban revitalisation specialist (URS) industry, Mo said.

This comes as the URS industry is expected to grow at a 6.8 per cent three-year compound annual growth rate, from a range of S$380 million to S$450 million in 2024 to a range of S$470 million to S$550 million in 2027.

Growth drivers include the government’s commitment to protecting local heritage, an uptrend in adaptive reuse of heritage buildings, an increase in conservation projects and robust growth in Singapore’s economy and construction industry, Mo said.

Additionally, LCC is a dominant player in the relatively niche URS industry, holding an estimated 15.7 per cent market share, according to research firm Converging Knowledge.

Mo highlighted the group’s strong project track record – it has won contracts for the National Museum of Singapore and several Orchard Road conservation shophouses, and clinched the Urban Redevelopment Authority’s Architectural Heritage Award for Conservation and Innovation for its work on St James Power Station, a national monument.

Future expansion plans

Mo also drew attention to LCC’s regional expansion plans to grow its business in Singapore and Malaysia as well as venture into new markets in neighbouring countries.

The company intends to enter the high-end residential space by expanding its interior fit-out and addition and alteration business in high-end landed residential properties. It plans to do so through its subsidiary, Lum Chang Decor, which specialises in renovation contracting services and holds a General Builder Class 1 license, Mo said.

Additionally, it is eyeing strategic partnerships with plans to explore acquisitions, investment opportunities, strategic alliances and joint ventures targeting complementary businesses in Singapore or overseas, she said.