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Tuesday, March 01, 2016

GCB: The taxman took everything!

Results Update

For QE31/12/2015, GCB's PBT dropped 36% q-o-q to RM15 million on the back of a 18%-drop in revenue to RM581 million. Its net profit took an even bigger knock; plunging 96% to a mere RM859k!

Revenue dropped mainly due to lower sales volume of cocoa cake and powder as compared to QE30/9/2015. Lower sales plus higher forex losses contributed to lower profit before tax. Net profit took a double whammy; a higher tax charge as a result of under provision in prior year of RM5.8 million and deferred tax charge for temporary differences of RM6.1 million. [The under provision of tax could be attributable to the exceeding low provision for tax in the immediate preceding quarter.]


Table: GCB's last 8 quarterly results


Chart 1: GCB's last 45 quarterly results

Valuation

GCB (closed at RM1.02 at the end of the morning session) is now trading at a trailing PER of 21.5 times (based on last 4 quarters' EPS of 4.75 sen).  If we put aside the lumpy deferred tax charge booked in this quarter and apportion the current year tax between QE30/9/2015 & QE31/12/2015, we can make a case for GCB chalking up a quarterly net profit of RM15 million. This would translate to its earning would be about 12 sen. Thus its PER could be 8.5 times.

Technical Outlook

GCB had a sharp rally after breaking above its long-term downtrend. The current pullback is likely to find support at RM1.00. If that fails, then it may go down to RM0.90.


Chart 2: GCB's monthly chart as at Mar 1, 2016_12.30pm (Source: ShareInvestor)
 

Chart 3: GCB's monthly chart as at Mar 1, 2016_4.30pm (Source: ShareInvestor)
 
Conclusion

Despite a sharp drop in the financial performance for the last quarter, GCB is still rated a BUY based on positive technical outlook and fairly attractive valuation.

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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