Korvest Ltd

ASX:KOV

Korvest Ltd

ASX:KOV
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$10.51 (-0.5%)
Last close price
#330
Rank
4
Held by
6
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XXXXXX
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Valuation of $11.00
SudMav
Edited 3 months ago

Why I like the business:

  • Strong brand recognition for quality workmanship
  • Dividend yield of around 7% at current price (nearly 10% gross)
  • Consistent revenue since 2017 and is able to win contracts with quick turnarounds to maximise profits.
  • Current value equates to 13.5% ROI under McNiven, with expected ROE of 20% (slightly less than last year)


Recent H1 Update

  • Revenues - Down 1.1% to $51,125m
  • NPAT down 28.5% to $4,088
  • EPS down 34.8c
  • $670k one off costs to rectify Galvanising issue + engineering claim, some of which will be reclaimed via insurance
  • Ezystrut (main business) had some margin contractions initially due to increased staff, freight and occupancy costs.
  • 1.1m spent on trucking equipment to inhouse freight operations, WA live and SA going live in second half
  • Kettle change will be required in 2025 (est. outage 2-3 weeks according to chatgpt)
  • FY 2025 expected to exceed FY24 profit


Reading between the lines here, even with the slight decrease and outage, it appears that they have won a lucrative contract, and the price savings for in-housing freight will further improve margins.

Traditionally final dividend is much higher at the end of the year, and likely to be close to or similar to the 35-40c paid over the past few years.

Not a sexy business, but happy to be a beneficiary IRL since it bottomed at $2. Expecting them to continue this growth going forwards.


Est NPAT = $11.2m

EPS = 0.953

PE = Historic 9-12x depending where you are in the dividend cycle

Value = $9.5 to $12.5 range

Expecting it to reach $11.5 pre dividend payout but normalise back down to the $11 range.

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#FY24 Results
stale
juneauquan
Last edited 10 months ago
View author's company report

Two businesses: EzyStrut (cable and pipes) and Korvest Galviniser (galvinising)

90% of revenue, with slightly lower margins, is generated through EzyStrut

Flat-to-negative growth past three years, however impressive growth between FY21 and FY22

With a PE of about 10 and a dividend yield of 6.5%, the market views this company as more of an income play than growth.

Seems like the company's exists on a few major projects at a time. For instance in the trading update part of the presso they quoted

1 major project to commence in FY25 with supply into FY26 and FY27

1 major project in tender phase, at least 1 more expected in FY25

Twice in the company's FY24 presso, Korvest mentioned 'data centres'. Is this legit or they just trying to ride the AI/data centre trend. They did not mention Data Centres once in last years presentation.

Also in last years 'Full Years Statutory Accounts' in the 'Principal Activities' section there is no mention of data centres in the sectors/markets they service

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This year however 'data centres' has been added:

ec26110b4c1c9d579b7561a54a49d17614d007.png

There is a possibility the company's management realised during the year that data centres and this trend is something they can successfully tap into.

More than doubled CAPEX for FY24, half of which is growth CAPEX

31795c4a93b3d361fecae21d9297f660c49970.png


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#FY22 Results
stale
juneauquan
Last edited 3 years ago
View author's company report

Released 5pm on Friday 22 July.

Korvest is traditionally the first company to release their FY results (most are released in August)

Typically I would consider the release timing (after close of trading on a Friday) of this type of announcement as a major red flag. The company is wanting to hide the awfulness of the results!! That is my first assumption but it can be a generalisation that is wrong on occasion.

And it looks like a completely wrong assumption with Korvest's FY22 results.

Now Korvest has been listed on the ASX for about 50 years and to be honest has just chugged away without any signifcant growth. But could that be changing?

Revenue UP 42% to $99m.

NPAT UP 87% to $11.3m

EPS up 85% to 99c

Operational cash flow (OCF) went backwards

882a5415cf2b4a42841524363c5fde3806039c.png

BUT one of the reasons for the weakeness in OCF is due to changes in working capital as perfectly explained in Note 15


c12d56f73166c4695436c375b5b4c3283bb9cb.png


Inventories UP $8.1m

Receivables UP $2.8m

My question re Korvest

Is this the start of a signifcant growth phase for the company OR is the company benefiting through some tailwinds that won't last???

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Valuation of $3.00
stale
PortfolioPlus
Added 6 years ago
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