KUALA LUMPUR: RHB Research has maintained its forecasts for George Kent Malaysia as its earnings are in line. It reiterates its Buy call with an unchanged SOP-derived target price of RM3.78.
"George Kent Malaysia’s (GKent) 1HFY18 (Jan) revenue increased by 10.2% y-o-y to RM317m as both its engineering and metering segments posted higher revenue at 7.2% and 21.3% to RM242.8m and RM74.2m respectively.
"The higher revenue from the engineering segment was largely driven by the light rapid transit (LRT) extension works and Mass Rapid Transit 2 (MRT2). Net profit for the same period grew by 23.5% to RM43.9m.
"Part of the increase in its bottomline was driven by a higher margin from both segments with the engineering segment posting a gross margin of 19.9% in 1HFY18 vs 17.9% during the same period last year," it said.
While revenue increased 44.9% q-o-q to RM188mil, gross margin contracted to 19.4% from 26.2% in Q1. Net profit increased by 37% to RM25.4m.
"Interim DPS of MYR0.025 was declared. For the full year, we expect total DPS of MYR0.09 to be declared, implying a payout ratio of 45% – in line with the previous three years’ payout range."
On prospects, RHB Research believes that the government's rail-related infrastructure investments remain active as it continues to push for expansion in the national rail-networks.
"Additionally, prospects of job replenishment are also strong given that the Government’s intention to expand the national railway system. This includes work packages from the MYR55bn East Coast Rail Link (ECRL) and KL-Singapore High Speed Rail (HSR) projects."
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