Petdag: Bottom-line rebounded

Result Update

For QE30/6/2015, Petdag's net profit increased 33% q-o-q or 47% y-o-y to RM273 million while revenue was mixed- down 22% y-o-y but rose 6% q-o-q to RM6.49 billion. Revenue increased q-o-q as a result of an increase in average selling price by 5% and increase in sales volume by 2%. Bottom-line increased q-o-q mainly due to higher gross profit by RM102.9 million and higher other income by RM10.1 million partially offset by higher operating expenditure by RM24.6 million. Higher  gross  profit  was  mainly as  a  result  of higher  margins due  to  favorable  timing differences arising  from increasing MOPS prices  during  the  quarter.  In  addition, higher  volume  contribution  from  Retail  segment  and higher margin per litre for Commercial segment further contributed to the higher gross profit.

Table: Petdag's last 8 quarterly results

 
Chart 1: Petdag's last 29 quarterly results

Valuation

Petdag (closed at RM21.44 yesterday) is now trading at a trailing PE of 34 times (based on last 4 quarters' EPS of 64 sen). Based on this PER multiple, Petdag is overvalued. However, Petdag's bottom-line has recovered substantially in the past 2 quarters. If this improved performance can be maintained for next 2 quarters, then its full-year EPS could be 94 sen. This would push down its PER to 23 times. At this PER, Petdag is deemed reasonably valued.

Technical Outlook

Petdag tested its long-term uptrend line with support at RM16.00 in November 2014. From there, it staged a good rebound which sent the share price to a recent high of nearly RM23.00.


Chart 2: Petdag's monthly chart as at Aug 6, 2015 (Source: ShareInvestor.com)

Conclusion

Based the improved financial performance, reasonable valuation & positive technical outlook, I revised my rating for Petdag from a SELL to a HOLD.

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, Petdag.