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Monday, May 12, 2014

MISC: recovery still intact.

Result Update

In QE31/3/2014, MISC's net profit dropped from RM1.09 billion to RM528 million as preceding quarter's net profit was boosted by a bigger share of profit from joint ventures especially Gumusut-Kakap Semi-Floating Production System (L) Ltd. Despite lower net profit, it is good to note that MISC's operating profit increased 24.8% from RM404 million to RM504 million due to higher overall revenue which is the result of higher revenue from the Petroleum business (the result of higher freight rates) and higher progress billings on certain projects in Heavy Engineering.


Table: MISC's last 8 quarterly results


Chart 2: MISC's last 32 quarterly results 

Valuation

MISC (closed at RM6.41 last Friday) is now trading at a PE of 12.6x its FY2013 EPS of 51 sen. If exceptional gain, such as the one-off gain from the disposal of the Gumusut-Kakap Semi-Floating Production System of unknown quantum, is excluded, MISC's PE would be higher. The stock is likely to be fairly valued at the present moment.

Technical Outlook

From the weekly chart, we can see that MISC is in a gradual uptrend, which takes the shape of an irregular upward channel. On weakness, MISC may drop to the lower boundary of this channel at RM6.00. However, this should be a good level to get into this stock.


Chart 1: MISC's weekly chart as at May 9, 2014 (Source: Tradesignum)

Conclusion

Based on improved financial performance (albeit a q-o-q drop in net profit due to exceptional gain in the immediate preceding quarter) & mildly positive technical outlook (albeit short-term weakness now), MISC remains a good stock for a recovery play.

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, MISC.

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