1.
Sycal Ventures Berhad (SYCAL)
3Q14 EPS jumped 69% to 1.89 sen as net profit increased 69% YoY to RM6.1m. For
9M14, EPS surged 50% to 4.56 sen. Key
driver behind the good earnings growth for 9M14 is the Property division
which saw its PBT +102% YoY to RM8.3m. Property division is likely to have
benefited from better property prices in Kuala Lumpur and Perak. Construction division
PBT also jumped 44% to RM7.0m due to increased billing of contracts at Taiping
and Ipoh.
2.
Rare construction company with
net cash position. As of
3Q14, SYCAL net cash is RM4.6m. This is based on its total cash of RM10.7m,
short term loan RM1.4m, long term debt RM4.7m and equity of RM202.3m.
Comparitively, many other construction company has high net gearing exceeding
10%.
3.
Trading at only 40.5 sen or 35% below Book Value of 64.0 sen. This could mean the stock is
extremely undervalued as its earnings visibility is good at 3 years, strong
balance sheet and high earnings growth in 9M14 at 50% YoY.
4.
Theoretical Target Price of 53
sen based on 9x FY15 Fwd. PE. The 9x PE is in line with mid cap construction
valuation. FY15E EPS should reach 5.94 sen assuming 8% earnings growth to FY14E
EPS of 5.5 sen.
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