Sign: Earnings recovered on lower provision but revenue dropped

Results Update

For QE30/9/2015, Sign's net profit was mixed- up 26.6% q-o-q but down 26.7% y-o-y to RM4.9 million while revenue dropped by 18% q-o-q or 24% y-o-y to RM45 million. Revenue dropped q-o-q due to lower project revenue being recognized from both Kitchen & Wardrobe and Glass & Aluminium segments. Profit before tax has however increased due to lower provision for doubtful debts made, as compared to the immediate preceding quarter.

Table: Sign's last 8 quarterly results

 
Chart 1: Sign's last 31 quarterly results

Valuation

Sign (closed at RM2.12 at the end of the morning session today) is now trading at a trailing PE of 7.4 times (based on last 4 quarters' EPS of 28.7 sen). The low PER masked the fact that the last 2 quarters' EPS was significantly lower than the earlier 2 quarters' EPS. If the latest 2 quarters' EPS represents the new normal, then going forward, Sign's EPS would be about 14.6 sen and PER would be 14.5 times. At this PER, Sign is deemed fully valued.

Technical Outlook

Sign has a big drop in the morning session- losing 46 sen to close at RM 2.12. However, Sign is still in an uptrend line, with support at RM2.00. This level is also the horizontal support for the stock.


Chart 2: Sign's monthly chart as at Nov 24, 2015_12.30pm (Source: ShareInvestor.com)

Conclusion

Based on poorer financial performance and full valuation, Sign's rating is maintained as 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, Sign.