Saturday, November 23, 2013

Engtex - Take Profit For Now (Kenanga)

Engtex Group Bhd -
Last Price - RM1.68
Kenanga  RM1.68
Take Profit For Now

INVESTMENT MERIT

- Share priced jumped 47%. Since our Trading Buy call at 12th Sept 2013 at RM1.16, the stock has surged by 47%, outperforming the FBMKLCI index (+6.5%). We believe the stock has gained some recognition from the investors. Engtex has been identified as one of the water-related stocks that will benefit from the upcoming conclusion of Selangor’s water sector restructuring. At current price, we advocate investors to take profit as it is traded at +2-standard deviation above its 5-year historical average PER.


- Set to clinch big pipe orders from various infrastructure projects. In addition to Langat 2 as mentioned in our last report, Engtex is also eyeing water pipe supplies to other infrastructure projects namely Pengerang and Kuantan Port. Nonetheless, timing-wise, even if the award of these projects materialize in the next 3-6 months, we only expect the contractors to start ordering the water pipes at the beginning of 2015 as the initial civil works (i.e. earthworks) have to be completed first. Normally, the civil works will take about 12 – 18 months.

- RM5.0b potential orders for NRW reduction programme after the restructuring? Roughly speaking, the management is looking at RM5.0b worth of pipe replacement orders from PAAB to reduce the Selangor and Klang Valley NRW to 15% from c.32% currently. We believe PAAB will be spending heavily on the NRW reduction programme after the Selangor’s water asset restructuring exercises are completed, most likely by end of this year. Although we reckon that the government will not simply spend the whole RM5.0b in one particular year or two, it will still benefit the leading water pipe player like Engtex in the foreseeable future.

- Part of FY14 earnings will be driven by its property division. Engtex currently has two on-going property projects (i.e. Tiara Residence and Emerald Avenue) which are set to be completed by end-2013 – 2014. Both projects have been doing well with take-up rates of 67% – 85%, which will support its profit growth from FY14 onwards.

- Fairly valued, take profit. While we reaffirm our view that the company’s prospects remain bright in the foreseeable future, we reckon the stock is already fully priced at this juncture as it is already trading at its ”peak valuation” i.e. PER of 9.6x (i.e. +2 SD). Hence, we advocate investors to take profit. Our fair value maintained at RM1.59, benchmarked against its historical average PER of 6.0x FY14E EPS. Re-rating catalysts includes faster-than-expected of award of Langat 2, Pengerang and Kuantan Port projects, which may compel a revisit, going forward.



TECHNICALS

- Resistance: RM1.78 (R1), RM2.00 (R2)

- Support: RM1.60 (S1), RM1.51 (S2)

- Comments: Chart-wise, a potential short-term correction could be in the making as the bullish momentum is beginning to fade as shown by key indicators such as RSI, MACD and Stochastic. Hence, we suggest to take profit for now.



BUSINESS OVERVIEW

Founded in 1983, Engtex is a leading one-stop pipeline system provider in Malaysia. It is primarily involved in the manufacturing and distribution of water and steel-related products. Amongst the products manufactured are: (i) ductile iron (DI) pipes, (ii) mild steel (MS) pipes and fittings, wire mesh, hard drawn wire and steel service center, valves, hydrants, fittings, pipe asphalt/coatings and (iii) bitumens products, PVF and general hardware. It is also involved in some property development projects with a GDV of about RM1.0b.



BUSINESS SEGMENTS

- Manufacturing. Engtex’s manufactured products namely Ductile Iron (DI) pipes, mild steel, wire mesh and valves, fittings, bitumen and steel products makes up about 50% of the Group’s EBITDA.

- Wholesale & Distribution. Mainly PVF and general hardware where the products are distributed to hardware dealers, general hardware stores, subdealers, state waterworks departments, mechanical, and electrical contractors. The division also contributes about half of the Group’s EBITDA.

- Property development. Engtex has about a total 68 acres of landbank in Selayang, Kepong, and Kuantan. Outstanding GDV stood at RM1.0b which will last until 2016. As the division is considered new to the Group, its earnings merely contributed 4-5% of the Group’s EBITDA.


Source/Extract/Excerpts/来源/转贴/摘录: Kenanga-Research,
Publish date: 21/11/13

No comments:

Post a Comment

Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)
“错过时机”胜于“搞错对象”:不会全军覆没!”
做自己熟悉的事,等到发现大好机会才投钱下去

乔治·索罗斯(George Soros)

“犯错误并没有什么好羞耻的,只有知错不改才是耻辱。”

如果操作过量,即使对市场判断正确,仍会一败涂地。

李驰(中国巴菲特)
高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo


There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
冷眼(冯时能)投资概念
“买股票就是买公司的股份,买股份就是与陌生人合股做生意”。
合股做生意,则公司股份的业绩高于一切,而股票的价值决定于盈利。
价值是本,价格是末,故公司比股市重要百倍。
曹仁超-香港股神/港股明灯
1.有智慧,不如趁势
2.止损不止盈
成功者所以成功,是因为不怕失败!失败者所以失败,是失败后不再尝试!
曾淵滄-散户明灯
每逢灾难就是机会,而是在灾难发生时贱价买股票,然后放在一边,耐性地等灾难结束
  • Selected Indexes 52 week range

  • Margin of Safety

    Investment Clock

    World's First Interactive Investment Clock