Jobst's net profit dropped on lower turnover

Jobst has just announced its results for 1Q2009 ended 31/3/2009. Its net profit dropped by 46.5% y-o-y to RM5.6 million on the back of a 13.9%-decline in turnover to RM21.8 million. Compared to the preceding quarter, 4Q2008 Jobst's net profit was 127% higher an a marginal 2.2%-decline in turnover.

The q-o-q improvement in net profit was due to the absence of provision for diminution in value of investments and impairment loss on investment in an associate totaling RM5.4 million which was taken up in 4Q2008. If this exceptional item is excluded, Jobst's net profit actually dropped by about 20%. The drop in Jobst's bottom-line is mainly due to the drop in its turnover, which in turn is due to the economic slowdown. Given the bleak outlook for employment, I believe Jobst's operation will face challenging time ahead.



Going forward, I believe Jobst's EPS will probably be about 2 sen a quarter or 8 sen for full-year. At yesterday's close of RM1.13, Jobst would be trading at a PE of about 14 times. With limited growth prospect for the next 12 months, Jobst looks fairly valued at the present price.

Jobst's share price has been drifting lower since it broke below its long-term uptrend line in October 2008. In April, it broke above its medium-term downtrend resistance at RM1.10 level & a timid price recovery followed. I think Jobst's further upside will be limited & it will likely to trade sideway for a while until its business picked up again.


Chart: Jobst's weekly chart as at 14/5/2009 (Source: Quickcharts)

Being fairly valued and struggling with little growth (due to tough economics conditions), I would rate Jobst a HOLD for now. It could be rated as a long-term BUY if the share price were to drop back to RM1.00.