QL: Earnings jumped

Results Update

For QE31/12/2014, QL's net profit increased by 15% q-o-q or 25% y-o-y to RM56 million while revenue increased by 12% q-o-q or 10% y-o-y to RM733 million.


Table 1: QL's last 8 quarterly results

PBT increased q-o-q due to higher PBT & revenue from both the Marine Products Manufacturing ('MPM') & Integrated Livestock Farming ('ILM') divisions. The increased PBT from these divisions had more than offset the drop in PBT in the Palm Oil Activities ('POA') division. Compared to the corresponding quarter last year, PBT increased due to higher PBT for all 3 divisions, albeit lower revenue from the POA divisions. The y-o-y changes are as follows:

MPM's revenue increased 16% y-o-y due to overall higher contribution from surimi-based products,  fishmeal operations and new contribution from shrimp farming. MPM's PBT increased 17% y-o-y mainly due to better fishmeal and new shrimp farming contribution.

ILF's revenue increased 10% y-o-y mainly due to higher volume of raw material traded. Current quarter PBT increased 42% y-o-y due to higher contributions from raw material trade and poultry operations.

POA's revenue decreased 2% y-o-y mainly due to lower CPO price (RM2,142 current qaurter vs RM2,424 corresponding quarter). However PBT increased 9% due to higher contribution from Associate (Boilermech) as well as lower losses from Indonesia's oil .palm operations.

Table 2: QL's Segmental Results

Again, it is good to note that the profit margin has inched up in the past 4-5 quarters. This, plus the rising revenue, would lead to higher bottom-line going forward.


Chart 1: QL's last 27 quarterly results

Valuation

QL (closed at RM3.77 last Friday) is now trading at a PE of 26 times (based on last 4 quarters' EPS of 14.77 sen). Based on the PE of 26 times & last year's earning growth of 18%, QL's PEG ratio stood at 1.4 times. This means that QL is overvalued.

Technical Outlook

QL continued its uptrend after it surpassed the recent high at RM3.60.


Chart 2: QL's weekly chart as at Feb 27, 2015(Source: ShareInvestor.com)

Conclusion

Based on satisfactory financial performance & positive technical outlook, QL is still a good stock for long-term investment. However, its upside is limited as it is fairly valued with signs of technical weakness emerging. 

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, QL.