Hidden gem Kentz a good way to wear green jersey with minimum risk
Published 17/06/2010 | 05:00
SHARESCOPE is a little wary of Irish stocks and believes the trend towards geographical diversification makes sense for most Irish investors. It is nevertheless pleasant to buy shares in well-run Irish companies.
Clonmel-based Kentz is such a company, although would-be shareholders will have to go to London's Alternative Investment Market to take a punt.
Kentz, a 90-year-old company that services the oil and gas industry by building equipment such as electrical instrumentation for customers such as Exxon Mobil and Royal Dutch Shell, has a history of steady growth in profits and sales over the past five years.
Low-key Kentz has been tipped several times by the 'Investors Chronicle' since its flotation two years ago but it is still something of a hidden gem.
Just six analysts, none of them Irish, follow the stock on Bloomberg for example, although all rate the stock a 'buy'. The company's share register is nevertheless blue chip for such a new company, with several well-known investment funds as well as a sprinkling of large pension funds.
Those shareholders got some good news last week as chief executive Hugh O'Donnell told the group's annual meeting in London that the momentum that delivered strong results in 2009 has been sustained in the current year.
The evidence for this comes from the backlog of business which stood at a very healthy $1.58bn at the end of April, compared with $1.49bn at the end of December 2009.
That gives the company enough to get on with for more than two years -- a welcome level of visibility at a time when many companies are still unable to forecast until Christmas convincingly. Kentz saw pre-tax profit rise 9.2pc last year to $44.5m and analysts are expecting a pre-tax profit of $54.1m on sales of $868.2m for 2010. Kentz has managed this without much borrowing and the company's net cash was $168.3m at the end of the year, up more than 10pc from the previous year's balance of $152.5m.
That cash pile is important -- the shares took a knock last September after the company reported a 15pc slump in cash in the first half. Despite the odd bit of jitters, the shares have generally seen steady gains over the past two years although it has been a case of steady as she goes rather than steep price rises.
One of Kentz's biggest attractions is its geographical spread. Like the industry it serves, the company is well diversified, with a presence in 26 countries. The company plans to return to Iraq this year as oil production picks up.
With a good range of big customers in many parts of the world and plenty of room to expand in one of the world's great industries, Kentz is worth investigating. It seems like a good way to wear the green jersey without breaking the bank.