GKENT (3204) - George Kent: Highly depend on Ampang Line LRT project
George Kent Berhad just released its 4th quarter result yesterday.
Revenue and net
profit for Q4FY15 dropped tremendously compared to Q4FY14 as there was
slight delay for the Ampang Line LRT project.
Profit margin
increased as contribution of meter segment was higher in this quarter
due to lack of progress in the engineering division that fetches lower
margin.
Full year revenue and net profit also dropped. Signal a 3-year growth in terms of revenue and net profit to an end.
Looking at its balance sheet prompt more questions.
Inventories increased close to 30%. This was probably from its meter division.
Trade receivables
increased close to 68%. This is big, considered that its revenue for
the financial year dropped. Furthermore, the amount of increase (~RM98m)
was 2 times its FY2015 net profit.
Reading
in conjunction with the cash flow statement, it's no surprise that it
recorded a negative operating cash flow due to high outflow of working
capital. Although its capex is small, the group still need to take up
some borrowings to pay dividends and for investing activities.
As a result of that, cash balance reduced while borrowings increased.
It may not be a
red flag as it may be a temporarily situation to solve its liquidity
problem. One need to monitor for few quarters more to make judgement.
Metering segment recorded lower revenue and net profit compared to corresponding quarter.
I'm little bit
surprised that its Metering segment showed a poorer performance. I
expected there would be growth as the management mentioned they are able
to get contracts from Singapore PUB and Vietnam in previous quarters.
Throughout these 4 quarters, it's noted that this division able to chalk
up stable average RM4-5 millions operating profit quarterly.
The management
combined the Construction and and Infrastructure segment together to
form an Engineering division for segmental reporting beginning from this
quarter.
This Engineering
segment is my only concern all this while as it highly depends on the
Ampang Line Extension project. The contribution of Kuala Lipis Hospital
project is quite negligible. Management mentioned there was a
rescheduling of the work components for the project. So the group was
not able to conduct their work, no work progress, so no revenue was
recorded.
Sad thing is it did not mention why there was a rescheduling and when it will resume. Boss, this is most important.
Elsewhere, the
director also mentioned they are exploring opportunity in Philippines
and Indonesia for its Metering segment as they started to deliver in
small quantity there.
And there is rumour
that they are able to get the job for the Railway 3 project. But it's
better not to trust this kind of articles. Haha
I still quite fond
of its Metering segment, but the Engineering segment will drag the
group's performance down if the work did not resume and no new contracts
was awarded.
I will keep it in my watchlist.
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