KUALA LUMPUR (March 2): Fututech Bhd’s share price surged as much as 12.9% or 18 sen today, following an article in The Edge Weekly saying the construction firm expects earnings to grow significantly, backed by a construction order book of more than RM2.3 billion.
The stock closed 11 sen or 7.9% higher at RM1.51, with a market capitalisation of RM127 million; while its warrants was up 12.5 sen or 21.9% to 69.5 sen.
In an interview with The Edge Weekly, Fututech’s (fundamental: 2.55; valuation: 0.6) executive chairman Datuk Tee Eng Ho said he expects the group’s total earnings to be not less than RM150 million, over the next three years.
With the injection of his privately-owned construction assets into the listed vehicle, Tee said Fututech will be able to “reach the next level” and have the capacity to support larger-scale tenders and projects as a mid-tier contractor.
Tee is a controlling shareholder of Fututech, with 72.5% equity interests.
On Feb 6, he entered into exclusive negotiations to inject two of his family-owned construction companies — Kerjaya Prospeck (M) Sdn Bhd (KPSB) and Permatang Bakti Sdn Bhd (PBSB) — into Fututech.
Tee made a promise to Fututech’s shareholders that the company will inherit KPSB’s order book of RM2.25 billion for the next three years.
Along with that comes a profit guarantee of RM150 million for three consecutive financial years — FY15 ending Dec 31, FY16 and FY17, on a cumulative basis.
Ceteris paribus, the profit guarantee, means Fututech will grow its earnings almost six fold to more than RM60 million, compared with the RM15.1 million achieved in FY14, according to the article.
As at Dec 31, 2014, Fututech registered a net profit of RM15.1 million at net cash position of RM28.63 million, with no borrowings.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)