Specialist resource engineering and construction company Kentz delivered yet another strong set of first-half results as higher operating margins on recently completed contracts led to a 36 per cent bounce in pre-tax profits. And while this is unlikely to recur in the second half, there are plenty of reasons to keep believing in Kentz's exceptional growth story - leading us to reiterate our long-term buy stance despite a near-three-fold rise in the share price since 2009.
Kentz's substantial project backlog continues to grow despite the wider macro uncertainty - albeit at a slower pace of late. At the end of June, the backlog stood at $2.5bn (£1.6bn), up from $2.4bn at the end of 2011 and $1.6bn a year ago. Moreover, Kentz has again increased its amount of low-risk reimbursable contracts to 70 per cent from 60 per cent at the year-end, leaving the company less exposed to the provisioning that has recently hit competitors.
And while Kentz's shares have not been immune to the broader sector sell-off in recent months, the group's healthy cash pile, positive business mix and huge bidding pipeline - totalling $12.8bn over the next 18 months - give us confidence in the future.
Morgan Stanley forecasts 2012 EPS of 57¢ (50.6¢ in 2011).
KENTZ CORPORATION (KENZ) | ||||
|---|---|---|---|---|
| ORD PRICE: | 390p | MARKET VALUE: | £454.0m | |
| TOUCH: | 390-391p | 12-MONTH HIGH: | 512p | LOW: 324p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 209¢ | NET CASH: | $241m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 644 | 37.7 | 26.9 | 5.00 |
| 2012 | 704 | 51.2 | 28.1 | 5.50 |
| % change | +9 | +36 | +4 | +10 |
Ex-div: 26 Sep Payment: 26 Oct £1=$1.58 | ||||
