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Wednesday, February 10, 2016

MISC: Earnings rose due to early profit recognition

Results Update

For QE31/12/2015, MISC's net profit increased by 56% q-o-q but dropped 22% y-o-y to RM753 million while revenue rose 32% q-o-q or 45% y-o-y to RM3.3 billion. Revenue increased q-o-q due to recognition of EPC revenue for a finance lease asset under construction in Offshore business. Profits also increased q-o-q mainly due to recognition of compensation for early termination of term contracts for 2 vessels in LNG business. The latter - being a compensation for contracts terminated- means that future earning will be affected. The former which could lead to early recognition of earning may "borrow" against future earning. Both of these would suggest that earning in the future could be lower than what's reported now.


 Table: MISC's last 8 quarterly results


Chart 1: MISC's last 38 quarterly results

Valuation

MISC (RM8.48 last Friday) is now trading at a PE of 15.4.times (based on last 4 quarterly EPS of 55 sen). At this PE, MISC is deemed fully valued.

Technical Outlook

MISC is in an uptrend line with support at RM8.30-8.40. If this support is violated, MISC may drop to its strong horizontal support at RM7.50.


Chart 2: MISC's weekly chart as at Feb 5, 2016 (Source: ShareInvestor.com)


Chart 3: MISC's monthly chart as at Feb 5, 2016 (Source: ShareInvestor.com)

Conclusion
Based on challenging outlook ahead and full valuation, MISC is a good stock to be avoided for now. For those who have the stock, you can only hope that the uptrend line support at RM8.30-8.40 would remain intact. Thus, MISC's rating is maintained as 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, MISC.

2 comments:

luckystock2 said...

Hi Alex ,
Can you comment on the technical outlook and fundamental of cresbld ? Many txs !

Alex Lu said...

Hi luckystock2

Cresbld has experienced a sharp decline in revenue and profit over the past 2 quarters.

Its financial position as at Sep 30, 2015 is confusing. Its bank borrowings is huge at RM678 million while its assets include investment properties of RM299 million, operating financial assets of RM278 million (what are these?), receivables of RM261 million and cash & bank balances of RM174 million.

Why is its receivable outstanding at 335 days! Why is it having so much operating financial assets and cash & bank balances? Can the investment properties be disposed off? If possible, the sale proceed from the investment properties and operating financial assets can be used to pay down the borrowings. When the obvious things are not done, we should be concerned.

Chartwise, the stock has just broken below its long-term uptrend line support of RM0.95-1.00. Unless this is reversed quickly, the downtrend could continue. Strong support is at RM0.70-0.80.