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Monday, December 29, 2014

George Kent: Email Exchange with IR regarding Q3FY15

Regarding the latest quarter performance of George Kent group, I dropped an email to their IR representative and glad that they replied me few days ago. Below are the details. 

1) The revenue and net profit from Manufacturing and Trading segment for the latest quarter (Q3FY15) were lower than corresponding quarter (Q3FY14). What is the reason behind for this drop as the new contracts from Vietnam and Singapore should help to lift up its performance?

Whilst sales to Vietnam and Singapore helped to lift the revenue for Meters sales, lower OEM sales and the change in presentation of sales of scrap contributed to the lower revenue for Manufacturing and Trading segment.

2) At the third paragraph of the press release, it's written that

"For its cumulative 3 quarters of FYE2015, the Group reported cumulative revenue of RM235.9 million. Higher revenue of Meters was achieved by the Manufacturing and Trading Division, contributed by new contracts secured in Vietnam and Singapore"

From the data on the quarter report, manufacturing and trading segment recorded only RM71.8mils revenue for cumulative 3 quarters of FY2015 while recorded RM84.4mils revenue for cumulative 3 quarters of FY2014. How come the press release would stated that higher revenue of meters was achieved?

The press release commented on Revenue, not Profit. It is true that the cumulative Revenue of the Manufacturing & Trading segment is lower as highlighted by the shareholder above. However, the press release merely highlighted that Meters sales (one of the revenue sources) were higher, which is true. However, OEM sales, another revenue source within the Manufacturing & Trading segment were lower. In addition, sales of scrap for tolling purposes were no longer reported as Revenue but the profit thereof were set off against cost of sales. This change in presentation also contributed to the overall drop in revenue.

3) When will the construction works of the Phase II of Kuala Lipis Hospital begins?

The construction works for Phase II of the Kuala Lipis Hospital has begun in November 2014.

4) Regarding the order book for the construction segment, is that the group only left construction works from Ampang LRT Line Extension project and the newly awarded Kuala Lipis Hospital project?

The current order book for the construction segment consist of the Ampang LRT line, Kuala Lipis Phase II and Mengkuang dam project however; GKENT is actively bidding for other projects to replenish their order book.

5) With the current drop in crude oil price, what is the effect on the group's performance on Meters sales and Construction work tender rate?

We do not foresee any impact on the Group’s performance and tender rate.

6) During the latest AGM, Mr Tan also mentioned that the group is looking to diversify into oil & gas industry. Is that any update on this?

This is currently still in the exploratory stage as the Group is still reviewing their options.

So, the construction segment still highly depends on its Ampang LRT line extension as the contribution from the Kuala Lipis Hospital project is quite small. For its manufacturing & trading segment, I am quite interested to see how they can double their sales as mentioned by the management or only paper talk.

Regarding the venture into oil & gas as mentioned by Mr Tan during the last AGM that caused a spike, I think it's cooler than water now.

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