Korvest sees demand rebound

Engineering group Korvest enjoyed its best one-day gain in over a year this morning after management noted a strong rebound in demand for its services since July.

Engineering group Korvest (KOV) enjoyed its best one-day gain in over a year this morning after management noted a strong rebound in demand for its services since July.

The stock surged 8% to its highest level since August this year of $5.78 when the company said at its annual general meeting today that its first half results for the six months to end December is expected to be 30% to 45% ahead of the second half of the 2012-13 financial year.

This means its interim earnings is likely to come in around the same level as the previous corresponding period, and what is also encouraging is that management believes a number of larger projects will start during the second half of this financial year.

If the earnings momentum continues, it would put the stock on a 2013-14 price-earnings multiple of under 10 times.

However, dividend payouts might be tapered if suitable Korvest comes across a suitable acquisition. The company paid a 46 cents a share distribution in the last financial year, which is around 100% of its net profit.

The ratio could range between 65% and 90% in the “longer-term”, according to management, but is likely to be at the upper end of range for the next dividend payment.

Based on the previous year’s dividend, the stock is yielding around 8%, or 11.3% if franking credits are included.

Korvest is part of the Uncapped 100.

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