For QE30/9/2016,3A's net profit rose 11% q-o-q or 56% y-o-y to RM10 million while revenue dropped 9% q-o-q or 3% y-o-y to RM88 million. Revenue dropped q-o-q due to lower sales. Profits improved due to higher products margins, lower losses from a jointly controlled entity and higher forex gain.
Table 1: 3A's last 10 quarters' P&L
Graph 1: 3A's last 13 quarters' P&L
As at 30/9/2016, 3A's financial position is deemed satisfactory. Its current ratio stood at a high of 7.4x while its total liabilities to equity was only 0.2x.
3A (closed at RM1.24 yesterday) is now trading at a PER of 17x (based on last 4 quarters' EPS of 7.4 sen). While its PER is deemed high for a small-cap stock, its high valuation can be justified based on the industry exposure (the F&B sector) and healthy earning growth (of 32% over the last 2 years). That high growth would give the stock an attractive PEG ratio of 0.5x.
In October, Securities Commission Malaysia (SC) charged six individuals with insider trading offences under Section 188 of the Capital Market and Services Act 2007 (CMSA). Among those charged are:
- Fang Chew Ham, 69, the founder and Managing Director of 3A
- Executive Director Fang Siew Yee, 36, and
- Non-executive Director Fong Chiew Hean
Over the past 2 years, 3A has risen gradual from RM0.85 in January 2015 to a high of RM1.45 in June 2016. Now it has slid back towards its "uptrend line", SS with support at RM1.15.
Chart 1: 3A's monthly chart as at Nov 15, 2016 (Source: Shareinvestor.com)
3A may be coming out of a 5-year rounding bottom formation. The gradual rise may send the stock to test its previous high of RM2.20. A breakout above this level could be followed by a strong rally akin to the rally of 2009. Let's wait and see.
Chart 2: 3A's monthly chart as at Nov 15, 2016 (Source: Shareinvestor.com)
Based on good financial performance and position, reasonable valuation and mildly bullish technical outlook, 3A is a very good stock to consider for long-term investment.
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