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Thursday, May 12, 2016

Petdag: Earnings Improved

Result Update

For QE31/3/2016, Petdag's net profit increased 138% q-o-q or 7% y-o-y to RM219 million while revenue dropped 18% q-o-q or 19% y-o-y to RM4.93 billion. Revenue dropped q-o-q as a result of a 21%-decline in average selling prices. Operating profit rose by RM164.5 million q-o-q due to lower opex (by RM107.1 million) & higher gross profit (by RM64.2 million). Opex dropped due to lower repair & maintenance & lower manpower expenses (from lower yearly bonus payment!). Higher gross profit was a result of increased sales volume in Retail & Commercial segments and higher margin in Retail.

Table: Petdag's last 8 quarterly results

 
Chart 1: Petdag's last 32 quarterly results

Valuation

Petdag (closed at RM22.70 yesterday) is now trading at a trailing PE of 28 times (based on last 4 quarters' EPS of 80.9 sen). Based on this PER multiple, Petdag is fully valued.However, its earnings rose by 46% last 4 quarters (after a drop of 24% in the preceding 4 quarters). If it can grow at 30%, the stock is fairly valued. I doubt it can do so in the current global economic environment.

Technical Outlook

Petdag broke its intermediator uptrend line, SS at RM24 in March. It may trade sideways at either the immediate horizontal line at RM22 or the next one at RM19. However, it is still above its long-term uptrend line support at RM20. See Chart 3.


Chart 2: Petdag's weekly chart as at May 11, 2016 (Source: ShareInvestor.com)


Chart 3: Petdag's monthly chart as at May 11, 2016 (Source: ShareInvestor.com)

Conclusion

Based the improved financial performance and positive long-term technical outlook , I maintain my rating for Petdag as a HOLD. Investors will have to live with its high valuation & the mildly negative medium-term outlook for now.

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, Petdag.

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