Fitters- depends on property development

Result Update

For QE31/3/2013, Fitters's net profit dropped 18% q-o-q but rose 92% y-o-y to RM8.5 million while revenue dropped 39% q-o-q or 21% y-o-y to RM70 million. See Table 1.


Table 1: Fitters's last 8 quarterly results

Looking at Table 2 and Chart 1, we can see that the Property Development & Construction and Fire Serives divisions are now the main division for the group. Renewable & Waste-to-Energy division suffered a sharp drop in revenue and continued to breed.Can the Property Development & Construction division repeat its sterling performance in QE31/3/2013 where it recorded a pre-tax profit of RM9.6 million from a revenue of RM42 million? I have my doubt as the group has very small land bank (see my previous post).


Table 2: Fitters's segmental results for Mar 2013 & Mar 2012



Chart 1: Fitters's last 19 quarterly results

Valuation

Fitters (closed at RM0.845 at the end of the morning session) is now trading at a PE of 6.2 times (based on last 4 quarters' EPS of 13.6 sen). While the PE multiple is low, a drop in its earning could easily push the PE to double digit.

Technical Outlook

Fitters has broken above its downtrend line at RM0.65. Its immedaite ressiatnce is at the horizontal line at RM0.83 (which it may have surpassed) and then at RM0.93.


Chart 2: Fitters's weekly chart as at May 28, 2013_12.30pm (Source: Quickcharts)

Conclusion

Based on reasonable valuation & positive technical outlook, Fitters could continue to rise. However, I have serious concern that the company may not repeat its profit level again as the bulk of the profit came form the Property Development & Construction division which does not much land bank. As such, I feel that Fitters should be rated SELL INTO STRENGTH.

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, Fitters.