KUMAGAI Gumi (Hong Kong) results for the 15 months ended December 31 present investors with a dilemma: how to rate the stock? Kumagai's deputy managing director Frederick Ma laid emphasis yesterday on the group's desire to continue to build its capital base leading to a recurring-income investment portfolio, including rental income from property.
Core operations have been in steady decline, in terms of profitability, leading many investors to turn up their noses at the stock.
A turnaround in construction earnings might now be a likely prospect for the group, said Mr Ma. But this was unlikely to fire the hearts of investors with a lot of interest.
But, while recurring operational earnings have not shown significant growth, the group over the last three financial periods has shown itself able to boost profits with property-linked gains from developments.
From the schedule of pre-sales and completions ahead it looks as though the group can maintain this flow of earnings into 1995 and 1996.
In which case the low rating of the stock is unwarranted, after taking in property gains, even if they are of low quality in earnings terms.
