Zenith Energy (ASX:ZEN) share price takes a tumble despite reporting profits jumped 171 per cent higher


The Zenith Energy (ASX:ZEN) share price has fallen 6 cents or 5.0 per cent higher to $1.135 despite the remote power generating company reporting a 171 per cent increase in full year profits.

Recently featured as a Capital Club stock of the week, Zenith Energy said its growing number of contracts has led to it more than doubling its Build Own Operate contracted capacity from 88MW when it listed on the ASX to 189MW in August 2018.

Zenith currently has 12 contracts in place representing 420MW of generation capacity under control, and a robust pipeline of remote power generation opportunities.

Significant new contracts secured over the last 12 months include the Tanami Gold Mine for
Newmont Mining Corporation, the Dalgaranga project for Gascoyne Resources (ASX:GCY), and the Mt Morgans Gold Project for Dacian Gold (ASX:DCN).

Revenue for the 12 months to June 30th 2018 increased by 64 per cent, with net profit after tax up 171 per cent to $8.47 million, significantly outperforming the forecast in its May 2017 prospectus.

Earnings per share were 47 per cent higher at 8.65 cents. With the Zenith Energy share price at $1.135, Zenith shares trade on a price to earnings ratio (P/E) of 13 times earnings. The company is capitalised at around $90 million.

One of the most attractive small cap opportunities

Looking ahead, Zenith Energy says it has entered FY2019 with a strong balance sheet and a robust pipeline of opportunities among new and existing clients.

Zenith Managing Director, Hamish Moffat, said the company has set itself a goal of converting a significant portion of its current 380MW pipeline pipeline to contracted capacity.

Naheed Rahman of Flinders Investment Partners had previously estimated Zenith Energy shares trade on a FY20 forecast P/E of around 8.5 times earnings, making it one of the most attractive small cap opportunities currently available.

Zenith Energy shares have had a strong run, before today jumping almost 30 per cent higher in the past month.

Today’s share price reaction is likely a case of profit taking.

Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au