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Wednesday, February 08, 2017

SKPetro: The Next Upleg In Sight

Technical Outlook

SKPetro broke above its intermediate downtrend line, RR at RM1.60 in late December 2016.


Chart 1: SKPetro's daily chart as at Feb 6, 2017 (Source: MalaysiaStock.Biz)

The upside breakout could be the start of the next upleg for SKPetro. Its upcoming resistance will be from the psychological RM2.00 mark and then the horizontal line at RM2.20.


Chart 2: SKPetro's weekly chart as at Feb 6, 2017 (Source: MalaysiaStock.Biz)

Recent Financial Performance

The results for the last 4 quarters show the poor performance of the company due to the slowdown in the O&G sector. However I believe that the worst could be over and what's ahead for SKPetro is a slow but steady recovery.


Table: SKPetro's last 8 quarters' P&L


Graph: SKPetro's last 22 quarters' P&L

Latest Financial Position

As at 31/10/2016, SKPetro's financial position is deemed tight. Current ratio stood at 1 time and gearing ratio was at 1.8x.

Valuation

SKPetro (closed at RM1.80 yesterday) si now trading at a PER of 20x (annualized EPS of 9 sen based on last 2 quarters' EPS). I believe this is a fair PER given that the company is coming off its trough earnings.

Conclusion

Based on improving financial performance and position, fair valuation & mildly positive technical outlook, I rate SKPetro a good stock to consider 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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