Kenanga upgrades George Kent to outperform with lower TP of RM2.20

KUALA LUMPUR: Kenanga Research said George Kent (M) Bhd's 1Q19 core net profit of RM18.9mil came in broadly within expectations.

It upgraded the counter to outperform from underperform with a lower target price of RM2.20 from RM3.65 previously.

The research house said the first quarter net profit dipped 4% on year despite a 23% drop in revenue as the impact was cushioned by 473% higher contribution from associates and joint ventures due to the LRT3.

"The drop in revenue was driven by both its construction and metering divisions which we believe could be due to the timing of the billings for its on-going projects and meter orders."

Kenanga believes the total cost of LRT3 will approach RM14 bil to RM15bil but believes the government will continue with construction works as most of the contracts have been awarded to various contractors who have begun construction works. 

"While we think that LRT3 is likely to proceed, we highlight that there would be significant risk to earnings and valuations on the contrary," said the research house.