Press Metal Bhd ('PMetal') is involved in the manufacturing & marketing of aluminium & related products. The operation is divided into 3 divisions; extrusion, tool & dies and surface finishing.
Recent Financial Results
PMetal has just announced its results for QE31/3/2007. Its net profit increased by 104% q-o-q or more than 17-fold y-o-y to RM25.2 mil. Turnover has also jumped by 63% q-o-q or 149% y-o-y to RM301 mil. When comparing the last 4 quarters with the preceding 4 quarters, we can see that net profit has increased by more than 3-fold from RM10.5 mil to RM44.4 mil, while turnover has increased by 87% from RM453 mil to RM844 mil.
Current Financial Position
PMetal's liquidity position is deemed acceptable with current & quick ratio at 1.2 & 0.8 times, respectively. Despite the sharp rise in sale, working capital management was adequate to contain the rise in debtors & inventory. This can be seen in the improvement in debtors' collection period to 75 days (of sales) & inventory turnover to 67 days (of sales).
Gearing has also improved to 1.4 times due to increased paid-up capital & retained profit.
Valuation
Based on closing price of RM1.66 as at May 29 & annualized EPS of 22 sen (basing on last 2 quarters' earning), PMetal is now trading at a PE of 7.5 times. This is fairly attractive given the company's rapid growth.
Technical Outlook
From the 2 charts below, you can see that the share price may be running ahead of the company's earning. The share price has risen from RM0.45 about 6 months ago to the current level of RM1.60/70; a gain of 370%.
Chart 1: PMetal's daily chart as at May 29 (courtesy of Quickcharts)
Chart 2: PMetal's weekly chart as at May 29 (courtesy of Quickcharts)
Conclusion
PMetal is a stock for the medium-term. The trick is how to gain entry despite the sharp run-up in share price. Maybe, we can accumulate on weakness at the 10-day SMA, currently at RM1.55 level.
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