Thursday, November 29, 2012

PTARAS and FAVCO: the 2 well-performing counters in construction support industry

In my current stock investment portfolio, there are 2 well-performing counters in construction support industry, both having forward PE ratio below 5. Despite the recent KLSE market slowdown, I still hold on to them and will consider to contrarily increase my position should their price drop following the market sentiment.

Both of them have healthy order book, consistent earning growth, and their business are very unlikely to be affected by the outcome of the upcoming general election of Malaysia.

The main business of Pintaras Jaya (PTARAS, 9598) is piling & foundation systems, civil engineering and superstructure building. In 1999, it acquired Prima Packaging which manufactures metal pails & cans as container for paint, chemical, lacquer, motor oil, ink, food, etc.

One of the attractive points of PTARAS is it managed to obtain high profit margin from its business.

PTARAS is cash rich with zero debt, and they have engaged with 3 fund managers to invest a large portion of their cash reserved into the share market. The 3 fund managers are: Kumpulan Sentiasa Cemerlang, Singular Asset Management, and Pheim Asset Management. This should be a better option than keeping the cash in bank and earning the low interest rate, as long term return of well-managed stocks is expected to be better than bank interest. However, certain people might not like this, as its investment gain/lost will fluctuate its earning figure in financial reports.

PTARAS is trading around its NTA of RM3.14 now. It has declared a final dividend of 12.5 sen single tier in respect to its last financial year, which will gone ex on 27 December 2012 and payable on 15 January 2013.

Favelle Favco (FAVCO, 7229) was an Australian company, bought over by Muhibbah Engineering (MUHIBBAH, 5703) in 1995 and becomes a subsidiary of the later since then.

FAVCO's business involve in the designing, manufacturing, supplying, servicing, trading and renting of tower cranes, offshore cranes, crawler cranes, wharf cranes and marine winches.

FAVCO has manufacturing facilities in Malaysia, Denmark, USA and Australia. They have own marketing arms in Malaysia, Singapore, Australia, UK, UAE, etc. as well as a strong dealer network around the world. In fact, 90% of the world's 13 tallest buildings had used Favco's tower cranes during their construction.

As at 21 November 2012, FAVCO's outstanding order book stood at RM746.1 million, of which majority is from the oil and gas cranes for the offshore oil and gas exploration and production activities. Remaining are from the shipyard, construction and wind turbine industry. This will keep them busy for the whole year of 2013.

FAVCO's D/E ratio has been declining from year to year. The D/E for FY2011 is at healthy level of 22%, and it is in a cash surplus position. Its net profit margin has been kept on improving over the past few years from 4.17% in FY2007 to 9.87% in FY2011.

It seems that the stock price of FAVCO has been laggard behind its strong fundamental and business performance, probably caused by its parent MUHIBBAH which has some issue in its Asia Petroleum Hub (APH) project. Anyhow, the problem with MUHIBBAH should not affect the fundamental and business of FAVCO at the time being.

MUHIBBAH has just sold a crane fabrication yard in Australia to FAVCO recently, which I see is positive to FAVCO future financial.

Disclaimer: This article is intended for sharing of point of view only. It is not an advice or recommendation to buy or sell any of the mentioned stock counters. You should do your own homework before trading in Bursa Malaysia.


Post a Comment

Hint: Click on the "Older Posts" link to continue reading, or click here for a listing of all my past 3 months articles.