Let's do the Splits

"Cut my pie into four pieces, I don't think I could eat eight." 

from the lovable and funny Yogi Berra.

Yesterday, The Edge Daily had an article on the growing number of Malaysian listed companies going for share split. It mentioned 4 companies: Liihen, Taliwork, Tasco & VS. The last 3 companies were covered by me in earlier posts.

1) VS

VS has a rolling 4-quarter EPS of 60 sen, which gives the stock a trailing PER of 10.6 times (at yesterday close of RM6.37). While this PER is not exorbitant, we must contend with the possibility of the stock trading at peak earning. For more on VS, go here.

The share price rallied by 30-40% before the announcement of the 1-to-5 share split. At this point of time, the upside for the stock is very minimal. I believe the rating should now be revised to SELL INTO STRENGTH.


Chart 1: VS's monthly chart as at Aug 3, 2015 (Source: ShareInvestor.com)

2) TALIWRK

Taliwrk's share price rallied 20-30% after the announcement of the 2-to-5 share split that come with a bonus warrant of 1-for-5 (after the split). At the close of RM3.87 yesterday, Taliwrk is now trading at a PER of 28 times (based on annualized EPS of 13.7 sen). Thus, the stock deserves a rating of SELL.


Table 1: Taliwrk's last 8 quarterly results


Chart 2: Taliwrk's monthly chart as at Aug 3, 2015 (Source: ShareInvestor.com)

3) TASCO

Tasco's share price rallied 20-30% after the announcement of its 1-to-2 share split. At the close of RM4.30 yesterday, Tasco is trading at a PER of 14 times (based on last 4 quarters' EPS of 30.7 sen). At this PER, Tasco is deemed fairly valued. I would maintain my HOLD rating for TASCO as its business prospect is still good.


Table 2: Tasco's last 8 quarterly results


Chart 3: Tasco's monthly chart as at Aug 3, 2015 (Source: ShareInvestor.com)

Based on the above, we must be careful jumping into stocks with pending share split exercise. If the share price has run up, there is nothing to gain from investing in this type of stocks. The one having the big laugh is the major shareholders.
 
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, Liihen, Tasco, Taliwrk & VS.