Deleum: Down But Not Out Yet

Recent Financial Results (cr1.53, gr 0.93)

For QE31/3/2016, Deleum's net profit dropped by 26% q-o-q or 28% y-o-y to RM6 million while its revenue was mix- declined by 25% q-o-q but rose by 12% y-o-y to RM151 million.


Table 1: Deleum's last 8 quarterly results

Profits dropped q-o-q due to Power and Machinery segment recording a RM37 million drop in revenue which resulted in a RM9 million drop in profit contribution.


Table 2: Deleum's segmental performance for QE31/3/2016 & QE31/3/2015
 
Compared to last year, profits improved due to lower loss incurred by Integrated Corrosion Solution segment (from RM3.57 million to RM0.23 million).

 
Table 3: Deleum's segmental performance for QE31/3/2016 & QE31/12/2015

Despite the extremely challenging operating environment, Deleum was able to stay profitable due to steady revenue while sacrificing profit margin when necessary.


Chart 1: Deleum's last 38 quarterly results

Financial Position

Deleum's financial position is deemed acceptable as at 31/3/2016. Its current ratio stood at 1.5 times while total liabilities to equity has risen substantially to 0.9 times.

Valuation

Deleum (closed at RM1.16 yesterday) is now trading at a PE of 10.7 times (based on EPS of 10.8 sen for FY2012). At this PER, Deleum is deemed fair. Dividend payment has understandably dropped from 7.5 sen p.s. to 5.5 sen p.s.. At this reduced amount, the dividend yield is at 4.7%.

Technical Outlook

Deleum is poised to break above its intermediate downtrend line at RM1.20. See Chart 2.


Chart 2: Deleum's weekly chart as at May 19, 2016 (Source: Shareinvestor.com)
 
It is still trading above its long-term uptrend line at RM0.95-1.00. see Chart 3.


Chart 3: Deleum's monthly chart as at May 19, 2016 (Source: Shareinvestor.com)

Conclusion

Based on decent financial performance & position, reasoanble valuation & positive technical outlook, Deleum is good stock for long-term investment.

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, Deleum.