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Tuesday, November 08, 2016

Scicom: Earnings Grew Despite Provision For Tax

Recent Quarterly Results

For QE30/9/2016, Scicom's net profit rose 8% q-o-q or 24% y-o-y to RM12 million while revenue was mixed; dropped 3% q-o-q but rose 16% y-o-y to RM52 million. PBT dropped q-o-q primarily due to the lower revenue for outsourcing projects. Net profit rose q-o-q as previous quarter number was dragged down by tax charged on its Indonesian operation of RM1.4 million. The group has also begun to provide for income tax for its Malaysian operation which started on 5/11/2015 as the tax authority has reduced the percentage of tax income exemption from 100% to 70% from that date onward. Unless it managed to obtain an extension of its pioneer status (that came with the MSC status), the company's income will be taxable like any other corporation from 6/11/2017.


Table: Scicom's last 8 quarterly results


Graph 1: Scicom's last 16 quarterly results

Historical Financial Performance

From FY2013 onward, Scicom's bottom-line has been on a steady growth, driven by revenue growth as well as growth in its profit margin. This has led to a growth in its EPS as well as its DPS.


Graph 2: Scicom's last 11 yearly results

Valuation

Scicom (closed at RM2.15 yesterday) is now trading at a PER of 17 times (based on last 4 quarters' EPS of 12.45 sen). Based on its last 2 years' CAGR of 20%, its PEG ratio is only at 0.85 time. Thus the stock is deemed fairly attractive. Its fair value is about RM2.50 based on a PEG ratio of 1 time. Scicom paid dividend of 9 sen for FY2016, which give the stock a decent DY of 4.2%.

Techncial Outlook

Scicom is in a downtrend since it peaked in March 2016. It rebounded in the past few weeks to test its downtrend line at RM2.20 today. A breakout above that level could signal the continuation of its prior uptrend. Given the current lethargic market, I think the stock is likely to stay below the downtrend line for a while longer.


Chart 1: Scicom's daily chart as at Nov 8, 2016_11.00am (Source: ShareInvestor.com)


Chart 2: Scicom's monthly chart as at Nov 8, 2016_11.00am (Source: ShareInvestor.com)

Conclusion

Based on good financial performance; steady growth; and, decent valuation, Scicom is a good stock for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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