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Kentz Corporation – good news on the numbers but shares now look expensive compared to others
Posted 30/08/11
The engineering group announced first half revenue up 48.2% to US$643.5m, profit before tax up 49.8% to US$37.7m and diluted earnings per share of 26.05 US cents (2010: 14.72 US cents). The backlog has moved higher, it was just a pity that cash flow disappointed and thre are good bargains to be had elsewhere.
Gross margins were marginally lower, 12.23% vs 12.39% in the comparable period, but operating margins marginally higher at 4.829% - the slim margins on offer highlight the perils of this type of contracting business!
The backlog of US$1,569.9m at the end of June 2011 has already further strengthened at the end of July to US$2,391.1m.
The geographical revenue mix changed with Southern Africa the major contributor with US$259.4m up 214% compared with the comparable period. 49.6% of revenues in the first half came from end user international and national oil companies including Shell, ExxonMobil, Chevron, Saudi Aramco, Kuwait Oil Company, Qatar Petroleum and Adnoc.
The cash flow didn’t present the usual rosy picture with cash used in operations US$2.6m, down US$44.8m on 30 June 2010 levels with the outflow attributable to the growth in receivables and work in progress in the period due to a combination of growth in the business coupled with progress and payment delays being experienced on the Medupi project in South Africa. However, the net cash position remained robust with net cash of US$193m.
The shares are hardly cheap at approx 14x 2012 upgraded estimates but KENZ has consistently delivered over the past few years and probably justifies the premium. However, following recent share price falls you can now pick up some high quality US names at much cheaper valuations
This entry was posted 8 months, 3 weeks ago.
