George Kent’s outlook improving, but still highly dependent on LRT3 execution

KUALA LUMPUR: While George Kent (Malaysia) Bhd’s (George Kent) outlook is improving, analysts note that this is still highly dependent on the execution of Light Rail Transit Line 3 (LRT3).

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), the current progress of the LRT3 is still at c10 per cent, but management remains optimistic in meeting the construction timeline as it has been rescheduled to 2024.

“Currently, management is expecting the redesign of the project to be completed by the second half of current year 2019 (2HCY19) and is hopeful that work will progress to full swing once its sub-contractor receives the final designs’ approval and proceeds with works on the stations,” Kenanga Research said.

“As for its metering division, management is excited as they are doubling their effort in promoting their smart metering solutions to various state governments and countries within the Southeast Asia region.

“Its smart meters are an add-on to existing meters that offers fixed network reading or mobile network reading allowing water players to bill customers effortlessly and we have built the potential into our estimates.”

That said, the research arm opined that impact will not be significant in the near term.

On George Kent’s latest financial results, the group’s financial year 2019 (FY19) core net profit (CNP) of RM78.3m came in within Kenanga Research’s expectations making up 105 per cent and 96 per cent of its and consensus full-year estimates, respectively.

“A third interim dividend of 3.5 sen was declared, bringing full-year dividend declared to seven sen which is above our expectations of five sen.”

Post results, the research arm made no changes to its FY20E CNP (RM82 million), while introducing its FY21E CNP of RM109.3 million.

Kenanga Research also maintained its ‘market perform’ call on George Kent with an unchanged target price of RM1.15 per share.

“We believe that its outlook is improving but still highly dependent on the execution of LRT3.”

Currently, management is expecting the redesign of the project to be completed by the second half of 2019 and is hopeful that work will progress to full swing once its subcontractor receives the final designs’ approval and proceeds with works on the stations.