Kung Sing Engineering Corporation, together with its subsidiaries, engages in the construction business in Taiwan. Its projects include roads, bridges, tunnels, subways, residential buildings, airports, and railways. The company also develops houses and buildings; and provides repairing of roads and bridges. Kung Sing Engineering Corporation was incorporated in 1941 and is based in Taipei City, Taiwan.

Taiwan

Kung Sing Engineering Corporation

Industrials

The company pays dividends irregularly. There have only been a few years with dividend payments in the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has barely been above zero and was substantially below that of its peers. 

5521.TW reported revenue of TWD 7 099mn in the last 12 months, up 33% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 84% from FY23 to TWD 0.02.

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Over the past six months the stock has exceeded the performance of this peer group by 19ppts and its growth accelerated by 8ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is mildly favourable.

The company has reported weak EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 2.3% in the last 12 months, a decline from 2.5% in FY23. 

Historically, 5521.TW has reported weak net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 0.1%, down from 1.3% in FY23. 

In the last 12 months, the return on capital employed (RoCE) declined to 0.2%, below the peers. 

Another important profitability metric, return on assets (RoA), amounted to 0.1% in the last 12 months, a decrease from 0.8% in FY23. 

Kung Sing Engineering Corporation reported a return on equity (RoE) of 0.2% in the last 12 months, down from 1.3% in FY23. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.2 in the past several years. This ratio implies a weak shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are close to minimal. In combination with rigorous business standards, shareholder rights are well protected.

5521.TW has very poor trading liquidity. The average private investor can sell his common position in the stock in a single trading day under normal market conditions. Liquidity may be unstable and is unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. The stock has a very small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note low margin volatility, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, bleak profitability, negligible return on capital, and poor working capital management.

In highly turbulent market conditions, 5521.TW is not overly volatile. In other words, the stock will fall less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be low. 

In normal market circumstances, 5521.TW is as volatile as an index. Put differently, without outstanding market volatility or shocking company news, the stock's price will move with the index. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to minimal. We would also like to highlight the minimal intraday volatility of the instrument. 

Considering past and projected metrics, the stock is slightly 'cheaper' than its peers. In particular, the stock is overpriced on P/E, 'expensive' on EV/EBITDA, undervalued on P/FCF. 

Kung Sing Engineering Corporation

NT$ 12.85

3

Kung Sing Engineering Corporation

NT$ 12.85

3

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

NT$ 12.85

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