K. Wah Construction Materials Ltd. (May 25, 2000)



 

Key Data

 
 

Stock code: 27

 
 

52 week H/L: $0.89/$0.50

 
 

Current price: $0.57

 
 

No of Issued Shares: 1,082,214,868

 
 

Market cap: 616.8m

 
 

Estimated P/E: FY00/3.2x FY01/3.2x

 
 

Estimated EPS: FY00/$0.177 FY01/$0.18

 
 

Estimated Profit pay-out rate: FY00/45% FY01/45%

 
 

Rating: Market performer

 
 

Summary

 
 

The Group has doubled its turnover in the last five years and reported a 2.1% increase in net profit for FY99.

 
 

The Group’s NAV is about $1 and current price is unreasonably undervalued.

 
 

Profit earning ability has been proved highly stable and it is now the Group’s strategy to look for further growth.

 

 

The Group has abundant cash in hand and planned to invest in IT Funds in order to tap on the technology realm.

 
 

Business Analysis

 
 

The Group is one of the major construction concrete suppliers in Hong Kong with track records of stable earning and high dividend policy. Business has been intensively focusing on its core operation with gradual upgrade its production process through computerization over the years.

 
 

The Group also formed seven joint ventures in Shanghai have been formed in concrete production as an attempt to penetrate into the huge China market. In addition, management is vigorously preparing to look for acquisition opportunities outside China and Hong Kong as to leverage globally for synergetic operation.

 

 

The Group’s cash generating capability is very strong and liquidity is considerably high. At present, it has 270 million cash on hand and the gearing ratio is at a very comfortable level of 14% only. In short, the financial position is rocky solid.

 
 

Outlook

 
 

In view of China will soon be affirmative its entry to WTO and the inauguration of the Walt Disney project in Hong Kong, the Group is anticipated to expose to more opportunities in both China and Hong Kong even though competition is also scaled up. Apart from a long operating history, the Group has the advantages of vertical integration in its operation as from quarrying to sale of ready–to-use concrete. Therefore, business will experience steady growth.

 
 

The Group plans to invest a significant amount in IT Funds as to capitalize on the new technology era while consolidating its core business. The investment is supplementary to the group development strategy and it will conduct in a carefully selective manner.

 
 

The Group is currently seeking new investment opportunities in Asia-Pacific region such as Southeast Asian countries and Australia within the scope of its core business. It is the Group’s global strategy to geographically diversify its operation as to ensure more balanced income.

 
 

Conclusion

 

 

 

Since the Group’s business is anticipated to grow at steady pace in the next few years and its well qualified and experienced management is very determined to further enhance shareholders’ interest through consolidation of current operation and invest in new ventures, thus its future is quite optimistic. Above all, the Group will adopt a high dividend payout policy to share with the investors of its business success. The stock is worth of long term buying at the current substantially discounted price to its over $1 NAV.

 





Research Home Page


If you would like to know more about a specific stock, you can ask us by emailing:Mr Kenny Tang.

This circular is for information only. The information and opinion presented are believed to be accurate but are not guaranteed and without legal responsibility. Neither the information, nor any opinion expressed, constitutes a solicitation by us of the purchase or sale of any securities or futures contract, or options thereon.