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George Kent (3204) - Q3FY2020 deep dive into their quarterly report


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- Consensus Target Price :RM0.97


- Consensus Rating:HOLD


- P/E 9.87 ,PTBV 1.01


- Dividend Yield:6.45%


This company is engaged in Engineering and Water Metering but because their

boss Tan Sri Dato ’Tan Kay Hock and his former chief are in close relationship

with Najib (rumoured to be his golf kaki). After the Malaysian election, the

stock price went from a high of RM 3.94 limit down twice and it fell all the way

till today 0.93 sens.


LRT 3 has been slowing down their progress although the lRT 3 price has been

finalized at 11.3 billion however their profit still dropped by 50.1% in Q3 2020.


This is due to pending negotiations with subcontractors and with fewer job

opportunities and increased competition, management indicated that they will

focus more on water metering business.



Financials – Income Statement


Revenue wise for their Q3 2020 decreased by about 30% from 103.55 million

to 72.91 million, this is mainly due to the “dramatic” slowing down of project

acquisitions and also cost reduction in their LRT 3 total cost.


The Group's profit before tax for the period ended 31 October 2019 is

RM46.32 million as compared to their PBT for their 31 October 2018 was

RM90.26 million which was 49% lower.


The lower profit before tax was mainly attributed to lower contribution from

the Engineering division. Other gains/(losses) mainly arose from unrealised

gain on foreign exchange of RM0.73 million on 31 October 2019 compare to

RM7.32 million on their 31 October 2018 report on foreign currencies held. 


- Revenue  -29.58%
 

- Profit Before Tax  -48.68%

 

enlightened   Engineering


Revenue of RM39.87 million for the current quarter ended 31 October 2019

was 39% lower as compared to RM65.13 million for the corresponding quarter

in 2018. Engineering segmented profit is RM8.87 million for the current

quarter ended 31 October 2019 was 64% lower as compared to RM24.83

million for the corresponding quarter in 2018. The lower segment profit was

mainly contributed by the lower revenue and gross profit margin in the current

quarter.



enlightened   Metering


The Group signed a long-term license agreement with Honeywell on 28 June

 
2019 to manufacture high-precision water meter measuring components and

exclusively sell these water meters to 26 territories, including 15 new

territories in the Asian region.


Revenue of RM33.04 million for the current quarter ended 31 October 2019

was 14% lower compared to RM38.42 million for the corresponding quarter in

2018.


Their metering segmented profit is RM5.97 million for the current quarter

ended 31 October 2019 was 41% lower as compared to RM10.19 million for the

corresponding quarter in 2018, this is mainly due to the lower sales and gross

profit margin in the current quarter.



enlightened   Financials – Balance Sheet


Their Q3 2020 report their total assets fell from 797 million in 31 Jan 2019 to

748.98 million in 31 Oct 2019. What we need to know from this is that their

Deposits, cash and bank balances decreased from 264 million to 217 million

which ultimately decreased their total assets.

 

Total assets  -6.03%

Deposits, cash and bank balances  -17.76%


But first we need to see why their cash and bank balances decreased, we will

dive deeper on their cashflow statement on what are they using their money

for. But as for their liabilities and equity wise I think you will be happy to hear

that their liabilities also decreased and not just a little but by a marginable

amount compared to their assets which is what we want to see.


Total Liabilities  -18.11% from 311.48 million to 255 million


Total Equity  1.7% from 485.63 million to 493.93 million


Gkent also has higher retained earnings but this is also due to the fact that

they are giving lesser in dividend.

 

enlightened   Financials – Cashflow statement


As you can guess cash from operating activities also decreased from 65.1

million in 31 October 2018 to 45.6 million in 31 October 2019 was mainly due

to the unrealised gain on foreign exchange.


Meanwhile their net cash used in operating activities also decreased

tremendously from 184.4 million to 37.5 million in the current FY.


Now for their cash and cash equivalents, I would say that they are still on the

“green side” for their cash as they are still a net cash company although their

cash also dropped but that is to be expected judging from their revenue and

profits of course their cash will be decreased as well.


Total cash and cash equivalents for the FY 2019 is 215.5 million compared to

their cash on the previous 31 October 2018 which is 260.4 million


Cash from operating activities  -29.89%

Cash and cash equivalents  -17.23%



enlightened   Dividends


Directors have declared a second dividend of 1.0 sen per share for FY2020

(FY2019: 1.5 sen per share) which will be issued out on 5th February 2020 to

all shareholders with an EX date of 9 January 2020.



enlightened   Share buyback


GKENT held their 68th AGM on the 9th July 2019, Share Buy-Back scheme was

approved by shareholders for the renewal from 9 July 2019 until the conclusion

of the next AGM of the Company to be conducted in 2020.


As of October 2019, GKENT has repurchased a total of around RM25,107,900

shares from the open of the market and a total of around RM26,650,113 as of

current. A total of 1,015,000 shares were repurchased from the open of the

market which is a total of RM986,832 cash used for share buyback.


For those who are interested in learning more on how we evaluate and

calculate an undervalued companies, below is a link to grab yourself an

opportunity to learn from the experts just as we have.



Ticket Purchase Link : https://home.valueinvestingsummit.com/12invest


enlightened———— Check us out ————enlightened

 
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#GKENT

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#LRT3

#WATERMETERING

#12INVEST


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