GKENT - Patiently waiting

source: http://www.malaysiastock.biz

Top line and bottom line of GKENT have been growing consistently, what's more surprising is that net profit doubled as compared to FY 16. I have mentioned in my last article Brief Analysis on Market Outlook & Construction Stocks (GGGE that i was keep buying and indeed i did it so right

the price had been stagnant for 3 months since dec 2016, the quarter result was released on 20 march and the closing of that day was 3.23

the price broke the strong resistance of 3.15 the next day, and keep breaking new high everyday, the closing price on 7 april was 4.22, gain of at least 23% if one bought it before quarter result

is Gkent fully valued at current price?

Gkent is very attractive if u look at ROE, profit margin, cash on hand

but one may think PE of 15.63 is quite expensive

however, investing isnt about looking at the past, i am expecting at least 50% growth in terms of EPS because FY18 will be including the revenue from LRT 3

am i being over optimistic? the EPS FY 17 increased 103% as compared to FY16, the management prove that they can nail it over the years

extracted from AR 2016

The engineering division contributed 79% of the top-line to the tune of RM471 million and is the main growth driver for FYE2017. The metering division also saw higher revenue amounting to RM128 million which makes up 21% of the topline for FYE2017 (extracted from qtr report).

Orderbook is vital to a a construction company, and with FY17 job wins at RM1.1bn, GKent’s orderbook stands at RM6.2bn. This translates to a superior cover ratio of 10.4x on FY17 construction revenue, one of the highest in construction sector

with the RM6.2bn orderbook on hand,

let's assume 6.2bn to be completed within 5 years=1.24b revenue per year

which is more than double of revenue of FY17 598,965 without taking water metering division which constitutes 19% revenue for the FY17 into account

so i am considered quite conservative in anticipating the EPS to grow 50% yoy

Eyeing to grow orderbook further

GKent is keen to participate in the system works for rail projects such as the East Coast Rail Link, Southern Double Track and High Speed Rail. Apart from that, it has also tendered for a water treatment plant job (RM200m) where it is going against 2 other contenders.

Source: Hong Leong Investment Bank Research

Extra info

Gkent is planning a 2-to-3 share split and investors love this kind of corporate exercise which can make the stock ''cheaper'' and affordable, and possibly driving the price up further

Technical outlook

Gkent is very bullish, trending updward since the released of quarter result, immediate resistance at 4.42, the stochastic and RSI indicators shown Gkent is overbought, for those interested, can try to catch around 4 on weakness

my 1st batch has earned  177% gain, after averaging up all the way before quarter result and it even triggered the max weightage set(20%) of my portfolio, here is my latest average price & gain

it's worth to wait

Disclaimer: it isn't a buying recommendation, your money, your decision