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Tuesday, October 31, 2017

Perstim: Earnings Stabilized, Dividend Cancelled

Results Update

For QE30/9/2017, Pertima's net profit rose 24% q-o-q but dropped 73% y-o-y to RM3.5 million while revenue dropped 1% q-o-q but rose 18% y-o-y to RM234 million. Revenue dropped q-o-q due to lower sales volume despite higher selling price. Profit before tax rose 27% q-o-q to RM4.4 million due to higher profit margin despite lower sales volume. The management commented that its growth and profitability will be affected by challenging operating environment due to volatility in the forex market and cheap imports from overseas.


Table: Perstim's last 8 quarterly P&L


Graph: Perstim's last 52 quarters' P&L

Valuation

Perstim (closed at RM5.70 yesterday) is now trading at a trailing PER of 15.5 times (based on last 4 quarters' EPS of 36.71 sen). If the 2nd half earnings are similar to the 1st half, then its EPS for FY2018 will be about 12.8 sen. That will push its current year PER to 44.5x. Perstim is very expensive at that PER.

In addition, the company appears to have cancelled its interim dividend. That would lead to a drop in dividend to 20 sen (or less in order to match with earning per share). Assuming dividend is kept at 20 sen, its dividend yield would be lowered to 3.5%. Perstim may no longer be viewed as an income stock if its dividend yield dropped to this level.

All in all, Perstim's valuation is deemed unattractive.

Technical Outlook

Perstim is still in an intermediate uptrend line, SS with support at RM5.50. See Chart 1.


Chart 1: Perstim's weekly chart as at Oct 30, 2017 (Source: Malaysiastock.biz)  

If Perstim breaks below the RM5.50 level, it may continue to slide lower to the next intermediate uptrend line, S1-S1 with support at RM4.00.


Chart 2: Perstim's monthly chart as at Oct 30, 2017 (Source: Malaysiastock.biz)  

Conclusion

Based on challenging operating environment, weaker financial performance & demanding valuation, I revise mt rating for Perstim from Take Profit to Sell.

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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