Monday 7 April 2014

George kent bhd a value gem to realise

George Kent Bhd a value gem
George Kent (Malaysia) bhd is an investment holding and management company. The company is engaged in the manufacturing and marketing of water meters, waterworks fittings, fibreglass reinforced polyester panel tanks and a variety of hot-stamped brass products and components.

Fundamental analysis
Par value = 50 sen
Share outstanding = 225.31mil
Market cap = 324.44 mil
Current share price = 1.45
Dividend = 0.075
dividend yield = 5.2%
Cash from operating activities = positive trend
Eps = Consistent and have been growing as more projects are coming
Revenue CAGR = have been growing approximately almost 121% last 5 year
ROE = 15%
ROI = 14%
ROA = 8%
NTA = 1.16
Price to sales = 0.64
Cash per share = 0.93
Current ratio = 1.54
Beta = 0.81
PE = 9

Prospect of company 
The main revenue source came from the construction side and the Ampart LRT Extension Project is expected to contribute positively and will significantly affect the earnings of the group for the coming financial year. Moreover, George Kent's manufacturing facility is undergoing a RM50 million 5 year transformation and modernisation program which will bring them a bigger effect on their financial position the next year years. George Kent has being penetrating into vietnamese market and also inroads in cambodia and Laos and the buoyant economy in Indo-China. This will eventually provide positive benefit in the long run of George Kent Business plan. George Kents revenue and profit source will have a steady flow as their subsidiary PNG water ltd has a 22 year concession with Papua New Guinea government to supply processed water to the capital city of Port Moresby. However, on the water side, George Kent is currently undertaking two major water infrastructure projects namely the Semantan Intake Package 3A of the Pahang - Selangor raw water transfer project and Panching Water Treatement plant in pahang value of more than RM 250 million which is each shareholder will receive one pie of the project. To be honest, i dont really find value in construction company but for george kent, their value is way higher as they have many project and many concession in overseas market and not politically link related and their company involves in manufacturing too which is a good growth in their business activities.

Financial View and intrinsic value
First and foremost, their cash at hand is so much that it comprises 64% of the share price and it is 0.93 cent per share. Besides being securing so much contracts, concessions, and manufacturing to export to other country, the company is still hanging on with a huge amount of cash. This amount might be able to allow them to expand further. Construction section, average pe for the market now is around 20 and for the last financial year, the eps of Gkent is 0.16 cent and i predict that since the last quarter they have a 50% increase in their eps, i suppose that with the profitability and expanding business they will continue to at least earn a 6 sen each quarter and come up with a total of 0.24 sen for this financial year 2014.
Thus the intrinsic value of Gkent is 0.24 x 20 = 2.40. Moreover, historically, gkent price to sales is around 1 and recent quarter its price to sales was 0.63 which is a good amount and if Gkent share price were to reflect its historical price to sales of 1 its share price should appreciate to 2.24 where i take the average amount 2.40 + 2.24 / 2 = 2.32 round of to 2.30.
Thus, i remain a target price of Gkent of 2.30 per share.
In addition to the 5% dividend yield that GKent is giving, this year with good financial performance, Gkent might be awarding their shareholder with a greater amount maybe comprise to a 6% dividend yield. Thus, i have started to accumulate this share and its one of my top pick together with picorp and upa, kmloong, tasco and tdm this year.

This is just my two cent point of view of the company, please analyse further and read up your own and invest prudently. Happy investing!