Monday, June 16, 2014

MESB: Share rallied on exceptional gain

MESB has been rising fairly well over the past few days. This follows the announcement of its 4Q14 results (here). On quick glance, MESB looks like a pretty attractive stock. However, on further study, you will find that the last 2 years of good performance was due to exceptional gain of about RM10 million each in FY14 & FY13. If this exceptional gain is excluded, the company's NP would drop to RM5 million or EPS of 11 sen.

Having said that, MESB's financial position is quite strong. It has net cash of RM15 million as at 31/3/2014 or 36 sen per share. Its current ratio is high at 3x while its gearing ratio is low at 0.3x.

At the current price of RM1.30, the stock is trading at a PE of 12x (or, 8.5x if the net cash is deducted from the share price). Either way, the PE multiples shows the stock to be fairly valued at best for a small-cap stock.

Thus, I believe the current rally is a good opportunity to exit this stock. 

Chart 1: MESB's weekly chart as at June 13, 2014 (Source: Tradesignum)

Table: MESB's last 11 yearly results (Source: Equities Tracker & Nexttrade)

Chart 2: MESB's last 11 yearly results (Source: Equities Tracker & Nexttrade)

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, MESB.


lai said...

Hi ALex,

Based on my Observation, SK Press looks like hitting the target technical price already.

Appreciate your further view on this matter.

Much thanks.

Alex Lu said...

Hi lai,

SKPres is on the run. It is approaching its potential target of RM0.50. If it overshoot, it may go to RM0.70-0.80.