Gasmsia: Earnings inching up

Results Update

For QE30/6/2015, Gasmsia's profit after zakat and taxation rose 18% q-o-q to RM33.7 million due to 7.1%-increase in gross profit resulting from 4.3%-increase in revenue to RM795 million, brought on by higher volume of gas sold. 

Despite a 17%-increase in revenue, profit after zakat & taxation dropped 31% y-o-y due to tariff revisions in May and November 2014 resulting in lower gross profit. 

In the Notes to the financial statement, Gasmsia stated that its "profitability ... for the financial year ending 31 December 2015 is expected to be in tandem with the level reflecting the prevailing tariff setting mechanism framework. The Group is currently discussing with the relevant parties to determine the basis of which the Gas Cost Pass Through (“GCPT”) is to be reflected in the current tariff regime. The final outcome of these discussions may impact the extent of gas costs for the volume supplied in excess of the regulated supply that are to be reflected in the current tariff structure in terms of the quantum and timing to the tariff revisions in the future."
 

Table: Gasmsia's last 14 quarterly results


Chart 1: Gasmsia's revenue, profits and profit margins for last 14 quarterly results

Valuation

Gasmsia (closed at RM2.12 yesterday) is now trading at a PE of 9.6 times (based on lats 4 quarters' EPS of 22 sen). Its dividend yield is about 4.6% (based on dividend payout of 50% & annualized EPS of 19.4 sen*). At this PER & DY, Gasmsia is deemed reasonably attractive.

(Note: Annualized EPS is arrived by multiplying the 1H2015 EPS of 9.68 sen by 2.)

Technical Outlook

Gasmsia is in a downtrend, with no support where it is heading. And, that's scary! That's why I recommended a SELL earlier. You may choose to stand back and wait for a bottom to form or you can take a plunge and get in early. You know the drill...


Chart 2: Gasmsia's monthly chart as at Aug 13, 2015 (Source: ShareInvestor.com)

Conclusion

Based on uncertain financial performance and negative technical outlook, Gasmsia is a stock to be avoided. But, if you are stuck in this stock, you should consider holding onto the stock rather than selling at the present prices. I can see value in the stock after its prolonged selldown. If you choose to be a contrarian by getting into the stock early, you are well-advised to do so slowly. Good luck!

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, Gasmsia.