Gunung Capital Bhd
GUNUNG Capital Berhad is principally involved in the provision of charter services for its fleet of passenger transportation assets and specialty vehicles, including coaches, bus, mobile clinics, vans, pick up trucks.

Aside from short-term commercial charters, the company has secured a number of medium-term contracts (ranging from 2-5 years) with the Ministry of Defence, State Government of Perak, 1Malaysia Development Berhad and several other companies with large fleet requirements.

Earnings of the company have been growing consistently since 2011, albeit at an uneven pace. Net profit increased strongly from RM9.6 million in 2011 to RM13.7 million in 2012 but slowed last year, where earnings grew marginally to RM13.9 million on the back of a 1.2% increase in turnover.

In 1H14, revenue dropped 2% y-o-y while net profit fell 9.7% y-o-y. This was attributed to lower utilisation for its fleet. Positively, operating margins remain healthy at over 46%. The company has a strong balance sheet with net cash of RM24 million at end-June 2014. The Edge Research rates this company a 2.3 out of 3 on fundamentals.

Its valuation score, however, is relatively low at just 0.6 out of 3. This is due, in part, to weaker earnings in 1H14. Dividends totaled 1 sen per share in 2012-2013, which translates into modest yield of 1.2% at the current price. The stock is trading near the lower end of its 12-month price range, trailing 12-month P/E multiples of 9 times and 1.1 times book value.

We suspect the stock will probably fare better over the longer-term. It recently signed two power purchase agreements with Tenaga Nasional to sell renewable energy from two mini hydro projects — with total capacity of 20MW — in Perak. When commissioned, targeted for early-2017, the projects will generate a recurring income stream for the company.

This article first appeared in The Edge Financial Daily, on November 18, 2014.