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Tuesday, May 20, 2014

GCB: Bottom-line improved q-o-q

Results Update

For QE31/3/2014, GCB reported a net profit of RM5.3 million as compared to a net loss of RM8.5 million for QE31/12/2013. When compared to the corresponding quarter last year, net profit is down 68% from RM16.5 million. Bottom-line recovered due to the increased sales volume and selling price of cocoa butter, while sales volume of cocoa cake and powder picked up. The higher net gain on forward currency contract also contributed to the increase of profit before tax for current quarter (QE31/3/2014).


Table: GCB's last 8 quarterly results


Chart 1: GCB's last 38 quarterly results

Valuation

GCB made a net loss of RM7.6 million for the past 4 quarters. GCB is trading at a PB of 2x. As a cyclical stock, the PE multiple will not be relevant at this stage. The PB can only be indicative in term of value. In early 2010 - before the huge rally of 2010-2011 - GCB was trading at a PB of 1.1x (with share price at RM0.30 & NTA at RM0.28 per share). At the peak in mid-2012, it was trading at a PB of 1.2x (with share price at RM2.10 & NTA at RM1.70 per share). Thus, GCB is not cheap in term of PB.

Technical Outlook

GCB is now in a sideways move with the support at the horizontal line RM1.40.


Chart 3: GCB's weekly chart as at May 19, 2014 (Source: Tradesignum)

Conclusion

Despite high valuation, GCB's rating is now revised from SELL to HOLD based on improving financial performance. In addition, it is worth noting that the stock is well-support at the present price of RM1.40.

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, GCB.

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