For QE31/12/2012, Success's net profit dropped 5% q-o-q bur rose 36% y-o-y to RM8 million while revenue eased off 5% q-o-q or 2% y-o-y to RM76 million.
Table: Success's last 8 quarterly results
Chart 1: Success's last 23 quarterly results
Valuation
Success (closed at RM1.04 today) is now trading at a PE of 4.2 times (based on past 4 quarters' EPS of 25 sen). Price to book is about 0.6 time. All in all, Success is an attractive stock.
Technical Outlook
Success is now resting on its long-term uptrend line at RM1.00.
Chart 2: Success's weekly chart asat Mar 11, 2013 (Source: Quickcharts)
Conclusion
Based on good financial performance (albeit a slight q-o-q decline), attractive valuation and positive technical outlook (albeit unexciting performance), Success is rated a good stock for long-term performance.
Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Success
Dear Alex,
ReplyDeleteYou are absolutely right. Success has a net cash position. Trades at a steep discount to book value. If I'm the major shareholder, I will take the company private.
The quality of earnings is not good as shown in the CFFO in relation to net income. Wonder why so much capital expenses in the business. Not successful in producing free cash flows which is necessary for dividend payment, investment in subsidiaries and associates, but back shares etc. Got to carry on borrowing to do all these.
ReplyDeleteHi K C
ReplyDeleteThe negative CFFO was attributable to more fund tied-up in working capital (increased in inventory & debtors plus reduction in creditors) as well as Fixed Assets acquisition & investment in associate.
The increased WC can be broken down into:
1) normal increase due to increased sales (both inventory & receivables turnover periods are same or improved)
2) drop in creditors' settlement period from 85 days to 63 days (computed by dividing amount payable by revenue, then multiplied by 365 days). That can be a worrying sign- your creditors are demanding early payment. However, if you looked into the same figure for FY2010, creditors' settlement period was 70 days. From this, I deduced that creditors' settlement period for FY2011 jumped for some reasons (probably project-related) and then it eased back.
All in all, I am comfortable with Success's financial position. But, I do note your point on the dividend payment. That may not increase as this group is still growing and it needs the fund to finance its expansion, be its FA acquisition, new venture or simply WC requirement.
Thanks for sharing your thought here.