Tasek: Another quarter of poor earnings

Results Update

For QE31/12/2015, Tasek's earnings continued to be weak, with net profit up 2% q-o-q but down 33% y-o-y to RM18 million while revenue rose 14% q-o-q or 9% y-o-y to RM188 million.Revenue rose due to higher volume of sales registered by both cement and ready-mixed concrete divisions. Nevertheless, the Group's current quarter profit after tax dropped y-o-y mainly due to lower profit margin from the cement segment arising from intense price competition in the domestic market and higher production cost. Lower interest income and lower share of profit from the Group's associated company during the quarter also affected the Group's profit for the reporting quarter.


Table: Tasek's last 8 quarterly results

Due to poorer results for the past 2 quarters, Tasek took the tough choice of reducing its dividend payout for the second quarters in a roll.

 
Chart 1: Tasek's last 31 quarterly results & dividend payout 

Valuation

Tasek (closed at RM14.84 yesterday) is now trading a PE of 19.8 times (based on last 4 quarters' EPS of 75 sen). At this PER, Tasek is deemed overvalued. With the decline in dividend payout, Tasek's DY dipped from of 11.5% to 7.4%. While still very respectable, the sharp drop may cause the stock to lose some of its long-term investors who bought into the stock for income.

Technical Outlook

The stock has tested its long-term uptrend line at RM14.50-15.00. With negative MACD reading and plunging stochastic, the near term outlook for Tasek is likely to be negative.


Chart 2: Tasek's monthly chart as at Feb 16, 2016 (Source: ShareInvestor.com)

If the stock breaks below the RM14.00, the uptrend could be over as this is probably the neckline of a developing Head and Shoulders formation. This will signal not only the end of the uptrend but the bearish reversal into a downtrend.


Chart 3: Tasek's weekly chart as at Feb 16, 2016 (Source: ShareInvestor.com)

Conclusion

Despite attractive dividend yield, Tasek is rated a SELL INTO STRENGTH based on demanding valuation and mildly negative technical outlook.

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, Tasek.