AGES (7145): AGESON BERHAD Common Industry, Uncommon Profitability.
Upon receiving encouraging feedback from the investors in the forum for this company – AGESON BERHAD (Or commonly known as AGES), I’ve decided to compile a second article featuring the company’s quarterly result to address some of your concerns.
The article was titled "Common Industry, Uncommon Profitability" for 3 main reasons, namely the norm of construction industry slowing down, the abnormal result delivered by AGES, and last but not least - to clickbait you into reading this post.. Just kidding!
Now, back to our main topic. AGES achieved RM 21.5 Million in sales and RM 5.1 Million in bottom line, this translates to a net profit margin of 23.72%. As far as my cocern and being a sand player in the field, the only other player that is able to consistently deliver double digit net profit margin would be Kerjaya Prospek Group Berhad, in which their net profit has been howering around 12% - 15%. But AGES had achieved not teens, but ties ("twenties") in their bottom line margin!
Do you get why the topic would be uncommon profitability?
However, to invest and profit handsomely, one need to study the cash flow (which is the bloodline) of a company. Over here we can see the company suffered minor negative operating cash flow in the cumulative 3 quarters. But compare to last year, it had improved 77.41% - which is significant!
We should bear in mind that apart from Kerjaya which have RM 180 Million~ in bank, and with their business model of giving out "upfront payment" first, the rest of the industry might see slow down in collection, of course I'm not going to lie to your face saying that AGES is outperforming in every aspects. But with careful studies, we can see a gradual recovery of the company!
*Please do note that Kerjaya was trading at 11 - 12 times P/E and has low liquidity as compared to AGES, which have a 5 - 10 million shares trading volume / day and was traded at less than 5 times P/E!
In this particular quarter, AGES was able to outperform due to them having a high progressive billing recognized in the period. But compared to the previous immediate quarter (QoQ), it was actually due to one completed project by AGES in the previous quarter.
But nevertheless, I believe AGES is actively tendering new projects, especially to motivated developers or main contractors who are lacking cash flow. Again, here comes the edge of having ICPS on hand - who said they are bad in nature?
To conclude my analysis today, I would like to emphasis once again on their sand business. If current earnings are fantastic, then with their sand business coming in it would be mind boggling. So, if you are an investor of AGES like me, stay tight and hold on to the train!
https://klse.i3investor.com/blogs/PMSS/2020-11-20-story-h1536520416-Common_Industry_Uncommon_Profitability.jsp
