KUALA LUMPUR (Jan 5): Pipemakers Engtex Group Bhd and JAKS Resources Bhd rose in anticipation of new contracts from the government’s water infrastructure projects.
Engtex Group rose 2.73% or 3 sen to RM1.13, with 211,500 shares changing hands.
It rose to an intra-morning high of RM1.14, but gave up the gain to settle at RM1.13.
The Edge Malaysia reported that pipe manufacturer stocks are under valued relative to their assets worth.
Engtex Group is traded at a modest six times earnings despite reporting increased profits over the past several financial years. The company is on track to post its best revenue and net profit for the financial year ended Dec 31, 2014, without obtaining any government project.
JAKS Resources was also up 1.12% to 45 sen in active trading this morning, with 2.54 million units done as of 12.30pm.
The Edge Research rated JAKS Resources, primarily engaged in the integrated water works industry including pipe laying and reservoir construction works, a fundamental score of 0.35 out of 3, and a valuation score of 0.90 out of 3, with 0 being the lowest score.
Fundamental scores are based on the strength of balance sheet and profitability, while valuation scores are based on historical return.
JAKS Resources was awarded a RM55.3 million contract under Package 5 of the Langat 2 water treatment plant and water reticulation system project for the supply and installation of pipes on Dec 22, 2014.
According to The Edge Malaysia, pipemakers were set to regain traction with the Selangor’s water restructuring exercise about to complete this year, and the Federal government’s billion-ringgit development fund allocation to replace water pipes.
It said the government’s allocation was unlikely to exceed RM1 billion per year due to budget constraint, but this could translate into hundreds of millions of ringgit in revenue to the small group of pipemakers with the necessary capacity to undertake projects.