SINGAPORE (July 12): CIMB has released a non-rated report for GKE Corporation following a visit to the group’s automated cement mixing plant in Wuzhou, China.

According to CIMB’s Roy Chen, GKE had invested in the cement mixing plant in 2013. The first phase of construction, comprising two production lines and a total production capacity of 800,000 cubic metres per annum, was completed in 2015 and began commercial operations in May.

The plant has easy access to transport which increases the areas it can supply to, given the short time for premix cement products to solidify. It is also in close proximity to its raw material sources, which cuts down on production costs.

As such, Chen believes the plant could help to supply Wuzhou city’s forecast demand for cement products of up to 5,000,000 cubic metres in 2016.

Back in Singapore, GKE completed a sale and leaseback of its 30 Pioneer Road property and plans to utilise the $45 million capital to redevelop its 39 Benoi Road property. Once the redevelopment is completed by late 2017, the latter’s warehouse space would be doubled to 400,000 sf.

Chen also notes that the group has been actively seeking other avenues for growth. “GKE’s recent acquisition of Marquis Services (a chemical warehouse operator) is immediately earnings-accretive and GKE continues to seek to divest its 49% stake in GKE metal logistics to free up resources,” writes Chen.

Furthermore, GKE’s management added that its 50% jointly owned liquefied petroleum gas (LPG) vessel had been awarded a six-month chartering contract with an option of another six months, at a daily gross rate of US$33,000 per day ($44,550 per day). They expect the vessel to deliver positive earnings by FY2017, and hopes for a turnaround into core profitability for the group by then.

GKE is currently trading at 0.77 times its book value, compared with its peers who are trading at 1.22 times, notes CIMB.

At 1.10pm, GKE shares were trading 4% higher at 10.5 cents.