PBA Holdings Bhd ('PBA') is involved the supply of water to the State of Penang. For more on PBA, go here.
New Development
PBA has just announced that it has been granted a 27% increase in water tariff starting from November 1 this year. The new & existing rate are tabulated below. (For more, go here)
Table 1: PBA's water tariff rates
Recent Financial Results
A quick look at PBA's recent financial performance shows that the company's profitability has stabilized in the past few quarters after a pro-longed slide that started in 2007. The decline in profitability happened despite a steady rise in turnover because of the absence of any increase in water tariff rate for the past few years. The new rate should boost PBA's bottom-line significantly but I am unable to estimate the quantum of this increase.
Table 2: PBA's last 8 quarterly results
Chart 1: PBA's past 21 quarterly results
Valuation
PBA (closed at RM0.93 yesterday) is trading at a trailing PE of 15.5 times (based on the past 4 quarters' EPS of 6 sen). At this multiple, PBA is deemed fully valued. With the new tariff rate, PBA's earning could be much better. Assuming that PBA's net profit returned back to the level achieved in FY2007 of about 13 sen, then PBA's future PE would be about 7.2 times.
Technical Outlook
PBA has been in a downtrend line since 2003. If it can break above that downtrend line at RM0.98-1.00, the stock could slowly rise in an uptrend.
Chart 2: PBA's weekly chart as at Sept 30, 2010_plotted on log scale (Source: Tradesignum)
Conclusion
Based on the new tariff rate & expected better results, PBA could be a good stock for long-term investment. A break above the long-term downtrend line at RM1.00 could be the start of a new uptrend for PBA.
7 comments:
hi alex,
can you pls comment on TNB? it has corrected slightly now?
can you also pls comment on zelan? i think this counter is moving in tandem with MMC, its parent.
btw, i also think that election fever is coming, those politically linked counters are being fried. :)
thanks
maxwealth88
Hi Alex:
What do you think of the new IPO - GW Plas? Worth to subscribe?
Hi MaxWealth88
Tenaga has good support at the horizontal line at RM8.80 & then at RM8.50-8.60.
Zelan is still in a long-term downtrend. However, the stock is in a short-term uptrend with support at RM0.65. Its immediate horizontal support & resistance are at RM0.70 & RM0.80, respectively.
can you also pls comment on zelan? i think this counter is moving in tandem with MMC, its parent.
btw, i also think that election fever is coming, those politically linked counters are being fried.
Hi Zap,
GW Plastic's IPO is priced at RM0.76, which is at 1 time its book value & about 12 times its EPS for FY2009. The latter would understate its profit because part of the listing proceed- an amount of RM9 million- would be used to construct a new factory, which should lead to high turnover & profit. Nevertheless, based on the above figures, I think that GW Plastic is fully valued.
can you please comment on JCY & P&O.. JCY drop from 1.15 to 0.098(31/09).. continuously 10 days drop...
While P&O any insider info given..
Hi ikah
JCY is still in a downtrend until it can break above the downtrend line at RM1.15. However, the decline is much more subdued over the past few weeks- indicating some buying support & less urgency in the selling. For those holding the stock, you may continue to do so unless JCY breaks below RM0.90 level. If that were to happen, you may have to dispose of this stock as the downtrend would continue.
P&O is in a very tricky position. Can it shoot up to RM1.50-1.60? It's crucial that it must not break below the RM0.98-1.00 support level. Let's wait & see.
Hi Alex,
can u pls comment on SAAG & KNM ??
what do u think about this stock??
Thx..
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