KEN HOLDINGS BHD (KEN, 7323) - Q4 2011 Quarter Report Review: Growth momentum is expected to continue?

From KEN HOLDINGS BHD (KEN, 7323) - Q4 2011 report: 

Income Statement:
Lower Revenue, but better profit margin.
EPS = 7.76sen
Total 4 quarters EPS = 25.53sen

Balance Sheet:
Cash amount: RM62,149,000
Cash per share: RM62,149,000/(95,860,000) = 64.83sen per share (Including Treasury shares and it is approximately only)
Zero borrowing.
Net assets per share = RM1.61


Cash Flow Statement:
Strong operational cash flow: From operation plus receivable & inventory.
Relatively small amount of CAPEX

From the quarter report:"

a)      Current Year-to-date vs Previous Year-to-date

Profit pre-tax for the financial year ended 31 December 2011 of RM31.4 million was RM7.28 million or 30.2% higher than the previous year corresponding period of RM24.1 million.  The improved earnings was mainly due to higher revenue recognised from the development projects in Shah Alam.

Performance for the respective operating business segments for the year ended 31 December 2011 as compared to the previous year is analysed as follows:-

1)      Property development operations – the increase in segmental profit by RM14.6 million (85.4%) to RM31.7 million was mainly due to the on-going development in Shah Alam which recorded a full 12-month in the current year compared to 3 months when it commenced work in the 4^th quarter of the preceding year.

2)      Construction operations – segmental profits at RM7.2 million increased by 126% from RM4.0 million in the preceding year corresponding period mainly due to increase in activities from its in-house projects.

a)      Current Quarter vs Previous Corresponding Quarter

For the current quarter ended 31 December 2011, the Group registered a pre-tax profit of RM10.4 million, a reduction of 11.1% or RM1.3 million compared to the preceding year corresponding quarter.  The lower pre-tax profit was mainly due to lower volume of revenue recognised in the said quarter compared to the preceding year quarter.

Performance for the respective operating business segments for the 4^th Quarter ended 31 December 2011 as compared to the previous year corresponding quarter is analysed as follows:-

1)        Property development operations – segmental profit reduced by RM1.1 million (15%) to RM6.2 million was mainly due higher development activities in the preceding year corresponding quarter compared to the current year quarter.

2)        Construction operations – segmental profits at RM3.0 million increased by 144% from RM1.2 million in the preceding year corresponding period mainly due to higher activities in the current quarter compared to the preceding year corresponding quarter when the projects just started.

MATERIAL VARIATION AGAINST THE PRECEDING QUARTER RESULTS

A comparison of the quarterly results of the current and preceding quarter is as follows:

	Current Quarter 01/10/11-31/12/11 (RM’000)	Preceding Quarter 01/07/11-30/09/11 (RM’000)
Profit before tax Profit after tax (before Minority Interest) Profit after tax (after Minority Interest)	10,411     6,994     6,994	6,331     5,004     5,004

The pre-tax profit for the current quarter at RM10.4million was higher than the preceding quarter ended 30 September 2011 of RM6.3 million was mainly due to higher revenue recognised in the current quarter.

PROSPECTS FOR 2012

Global economic conditions in 2012 are expected to remain challenging. Growth momentum is expected to continue with support from domestic demand. Based on the current economic outlook for Malaysia, the property development and construction industry is expected to remain progressive in 2012.

External forces such as raw material costs, fuel and energy costs including shortage of manpower in the construction sector are expected to continue to exert pressure on the Group's operating margin. Barring any unforeseen circumstances, the Board of Directors is of the view that the Group will record favourable performance for the financial year ending 31 December 2012."

Proposed First and Final Dividend: 6.0 sen per ordinary share less tax 25%

My Insights:
In last quarter review of KEN Holding (KEN, 7323), I mentioned about "So, let's wait whether got any surprise from KEN." But, so far, I only see the proposed dividend, which is not a big surprise for me. Although I have little bit disappointed, I still believe that KEN will contribute more in my portfolio in the next 12 months.

With EPS of 25sen, PE of 8, market price of KEN should be at least RM2.00.
With DY of 5%, dividend of 6sen, market price of KEN is around RM1.20 only.
(Note: these calculation involve the cash amount, if excluding the cash, more attractive figures can be obtained)

Therefore, it depends on personal strategy. If your target is to receive dividend annually with DY > 5%, the market price of KEN above RM1.20 may not help you achieve your dividend dream in this fiscal year. But if your target is grow with the company in next 1~3 years, maybe special returns will be given to your, if and only if, KEN keep growing as its expectation, based on KEN previous records as follows:

KEN previous records

 2005 Jun 10: Bonus of 1 for 2

                     2002 Nov 1 : RTS of 1 for 2 @ RM1.10 IP

2002 Nov 1 : Bonus of 1 for 1

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Written by: Xaivier Chia



(P/S: Author has KEN shares, the content of this post contains serious conflict of interest. Please don't make any decision based on the content of this article. Readers are advised to do their homework before making any investment or speculation decision.)

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