Heavy reliance one 1 major project in NSW and guidance for...

Heavy reliance one 1 major project in NSW and guidance for second half to be similar to first half. So looking at full year only 10-12cps and pe 20-25 at current price. Nothing to get excited about. Robust competition against their main revenue stream ezystrut. Civil infrastructure uses much less than resources infrastructure.

@vic_wattle,

Make no mistake, aesthetically, this business is no Mona Lisa lookalike.

But I think that its financial performance over FY2016 and FY2017 represents a confluence of very nasty events (some of them self-inflicted) and, as such, are not representative of the true earnings potential of the business under "normal" conditions.

As it happens, I think this result contains a few proxy clues to the worst being over for the poor folk at Korvest, and to the company's management starting to earn its keep (something that can't be said of it for the preceding several years).

When I look at the savage extent of the downturn experienced by the company's various businesses, the poor management of its capital and the spike in input costs over the past 12 months, for it to have continued to pay its shareholders dividends (albeit at reduced levels) without having to resort to debt funding, i.e., out of surplus organic capital generation, makes some comment about the strong cash generating abilities of the business.

A great many other companies I know - had they been subjected to the sorts of ill winds that have lashed KOV's sails - would have found themselves emerging from the storm, not with net cash in the bank, but in a degree of financial trouble.

Given the acute operating leverage in the business, I think that valuing it on point P/E multiples based on near-cyclical low earnings is unlikely to generate the right investment decision.

Don't get me wrong: I'm not saying that this is an easy, slam dunk cyclical play whose share price will recover as the cycle does; I do worry that there may today be some structural threats to the business, spawned by the last commodity boom, which did not exist before the boom, meaning that KOV may never again see the 45% to 50% GP Margins [*] which it enjoyed for most of its life. (In which case the company's stock will never again be priced in excess of $6)

[*] For context, recent GP Margins are as follows:
DH04: 43.4%
JH05: 48.3%
DH05: 45.5%
JH06: 47.1%
DH06: 41.9%
JH07: 47.8%
DH07: 45.6%
JH08: 43.0%
DH08: 47.7%
JH09: 47.7%
DH09: 48.8%
JH10: 43.4%
DH10: 43.5%
JH11: 42.4%
DH11: 47.0%
JH12: 47.1%
DH12: 47.1%
JH13: 48.5%
DH13: 47.5%
JH14: 45.5%
DH14: 45.0%
JH15: 4.2%
DH15: 40.1%
JH16: 42.3%
DH16: 36.5%
JH17: 37.3%
DH17: 38.5%

As can be seen, even before the commodity boom, KOV's margins were substantially higher than they are today. I suspect this is a reflection of new entrants to the industry, induced by the super-normal returns on offer during the resources boom, and I don't think those new entrants have gone away.