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Thursday, February 27, 2014

KSL- a plunge in top-line & bottom-line

Result Update

For QE31/12/2013, KSL's PBT plummeted by 95% q-o-q or 91% y-o-y to RM4.5 million while revenue dropped by 44% q-o-q or 3% y-o-y to RM122 million. KSL incurred a net loss of RM10.5 million as compared to a net profit of RM68 million in QE30/9/2013 or RM35 million previous year.


The company attributed the drop in its PBT for the current quarter to the following:
1. The loss arising from fair value adjustment of RM9.4 million on investment properties; and
2. Provision of deferred taxation for RPGT of approximately RM13 million.

That just doesn't adequately explain the severity of the drop in the bottom-line of the group. The questions that would beg for some answers are:

  • Why the sharp drop in revenue? Is it due to slow start for newly projects? Is it due to poor sales?
  • What are the other negative items that caused the drop in PBT by RM43.2 million y-o-y or RM87.5 million? The 2 items listed above amounted to only RM22.4 million.

Table: KSL's last 8 quarterly results


Chart 1: KSL's last 37 quarterly results

Valuation

KSL (opened at RM2.18 today) is now trading at a PE of 4.8 times (based on last 4 quarters' EPS of 45 sen). We cannot be sure what will be KSL's EPS for the next financial year. I am sure it will be negative as the last quarter. Would KSL rebound back to chalk up an EPS of 45 sen like the last 4 quarters or would it be like the preceding 4 quarters' EPS of 33 sen?

Technical Outlook

KSLis in an uptrend. Its horizontal support levels are RM2.20 & RM2.00.


Chart 2: KSL's weekly chart as at Feb 26, 2014 (Source: Tradesignum)

Conclusion

Based on poor financial performance, KSL is now downgraded to a HOLD.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, KSL.

6 comments:

Eelyn Soon said...

Hi Alex,

May i have your views for MFCB?

Jim said...

Hi Alex,

Can you comment on NYLEX?

Thanks in advance.

jinghee said...

Not understand why rpgt affect the company earning? It has to do with the buyer is it? Why company also affected?

Alex Lu said...

Hi Eelyn Soon

MFCB trades at a PE of 6.8x, which is fairly attractive. For a company that derived 70% of its earning from power generation 9with power palnts in Tawau, Sabah & Shaoxing, China), I feel that it deserves a higher PE.

Chartwise, it broke above the RM2.00 horizontal resistance in December 2013. Its target could be RM2.50-2.60. Currently, it is experiencing some correction which could be a good buying opportunity.

Alex Lu said...

Hi Jim

NYLEX made about 3.1 sen for 1HFY14. Thus, its full-year earning would be about 6.2 sen. This will give it a reasonable PE of 9x (at present price of 56 sen).

Chartwise, it needs to break above the 60 sen mark before its upleg can begin. The resistance above 60 sen would be at 70 sen, 80 sen & finally at 95 sen.

Alex Lu said...

Hi jinghee

RPGT will affect final demand and sales. If sales dropped, profit would follow suit.

In the case of KSL, I am not sure whether the decline in profit & sales was due to lower demand. I believe the company would have unbilled sales going into the last quarter. The question is why did it fail to complete construction of the ongoing project and realize the "sales" and profit.