QL has just announced its results for QE31/3/2012. Its net profit dropped 7.4% q-o-q but rose 1.0% y-o-y to RM31.9 million while its revenue dropped marginally 0.1% q-o-q or 0.9% y-o-y to RM498 million. The drop in revenue on y-o-y basis was due to a sharp decline in the Palm Oil Activities ('POA') segment which exceeded the increase in revenue in the Marine Product Manufacturing ('MPM') & Integrated Livestock Farming ('ILF') segment (see Table 2 below). As the profit margin for the MPM & ILF segment are 4-5 times higher than that of POA, the company's net profit improved.
Table: QL's last 8 quarterly results
Table 2: QL's 1Q2012, 1Q2011 & 1Q2010 compared
Chart 1: QL's last 16 quarterly results
Valuation
QL (closed at RM3.16 yesterday) is now trading at a PE of 20 times (based on last 4 quarters' EPS of 15.88). At that PE multiple, QL is considered overvalued. The market seems to factor in a significant jump in earning, which did not pan out.
Technical outlook
QL hit its all-time high of RM3.60 in early 2011. An attempt to revisit this high in January 2012 managed to only achieve a high of RM3.40. QL is likely to consolidate at the RM3.00 mark for a while. A Test of the Low of RM2.50 cannot be ruled out if the current poor market sentiment were to take a turn for the worse.
Chart 2: QL's monthly chart as at May 22, 2012 (Source: Tradesignum)
Conclusion
Based on good financial performance & strong management, QL will be a good stock for long-term investment. However, the stock is priced now to yield an abysmal return. In such circumstances, it is best to cash in our chip & invest in something more promising.
Invest into something else like? What about Gas Malaysia as long term buy?
ReplyDeleteTQ
Hi Kerry Lee,
ReplyDeleteI have just studied the prospectus of Gas Malaysia. I would put the EPS at a range of 8-10 sen for FY2012. The uncertainty which led to the range is:
1) When would the new selling price, cost price & margin kick in? Margin is supposed to drop to 11.5% in 1/12/2011 but it has not been implemented yet!
2) What will be the growth in sales volume for FY2012?
If I chose to be generous and assume the new pricing will not kick in for FY2012 and factor in a volume growth of 10%, the net profit could be RM126 million and EPS about 10 sen. If I chose to be less generous and assume the new pricing will kick in on 1/7/2012 and no sales volume increase (unlikely!), then the net profit could be RM100 million and EPS about 8 sen.
If we used Petgas's PE multiple of 24 times but factoring in a discount of 10%, then the value of Gas Malaysia would be in the range of RM1.72 and RM2.16.