GAB: Special Dividend of 30 sen

 Result Update

For QE31/12/2015, GAB's net profit increased by 44% q-o-q or 19% y-o-y to RM91 million while revenue increased 30% q-o-q or a meager 1% y-o-y to RM525 million. Group revenue and PBT  increased by 30% and 40% respectively against the immediate preceding quarter mainly due  to cyclical demand for CNY sell-in.


Table: GAB's last 8 quarterly results

What's encouraging is that the group's quarterly profit has surpassed the RM100 million-mark - an all-time high for the past 10 years! The improved profits was due to better profit margins!


 
Chart 1: GAB's last 40 quarterly results

Valuation

GAB (at RM13.08 today) is trading at a PE of 16.6 times (based on last 4 quarters' EPS of 78.59 sen). At this multiple, GAB is deemed fairly valued. In addition, GAB has a respectable dividend yield of 6.2%  (excluding the special dividend of 30 sen).

Technical Outlook

GAB peaked in May 2013 courtesy of the mad chase for yield in a world flushed with liquidity. This was noted in my post entitled GAB: Price to Perfection. Since then, the stock had corrected and it broke its uptrend line in January 2014.


Chart 2: GAB's monthly chart as at Jan 19, 2016 (Source: ShareInvestor)

In the past 1 year, GAB has been consolidating in a "ascending triangle" ["ABCD"] with support & resistance at RM12.80 & RM14.70, respectively. Since GAB is trading near the lower line ('BD"), I think the stock could enjoy a rebound & swing up to the upper line (giving an upside of RM2.00).

An upside breakout above the "ascending triangle" at RM14.70 could signal a reversal of the 2&1/2 year downtrend. On the other, if the stock breaks below RM12.80, it could signal the continuation of that downtrend. For now, I would rate a breakout on either direction to be unlikely. The more likely scenario is for the stock will remain range-bound between RM12.80 & RM14.70.


Chart 3: GAB's weekly chart as at Jan 19, 2016 (Source: ShareInvestor)

Conclusion

Based on improving financial performance, good dividend & fairly valuation, GAB is rated as a HOLD. GAB is not a bad idea for a trading BUY as it trades near a decent support at RM12.80 which could be a set-up for a possible upswing of RM2.00 to the resistance of RM14.70.

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, GAB.