SEG: Earnings Remained Weak

Result Update

For QE30/6/2016, SEG's net profit dropped 35% q-o-q or 60% y-o-y to RM3.2 million while revenue relatively unchanged at RM65 million. Profits dropped y-o-y partially due to the drop in student enrollment brought forward from the previous year. The new enrollment for 2016 was reported to be "encouraging,  which would result in stronger performance in the second half of 2016". We will have to wait and see.


Table 1: SEG's last 8 quarterly results


Chart 1: SEG's last 33 quarterly results

Valuation

SEG (closed at RM1.14 yesterday) is now trading at a PE of 60 times (based on last 4 quarters' EPS of 1.89 sen). As such, SEG is deemed overvalued. However, it pays a dividend of 12 sen last year, which translates to a DY of 10.5%. While it is unlikely that this level of dividend payment can continue, SEG will probably remain one of the highest dividend yielding stocks on our exchange.

Technical Outlook

SEG was able to hang onto the RM1.15 for the past 4 months after the support from the horizontal line at RM1.20 was violated in May. With the latest disappointing result, the share price has broken below the RM1.15 support. If the share price fails to recover above the RM1.15 mark soon, it could slide to the next support at RM1.00.


Chart 2: SEG's weekly chart as at Sep 5, 2016 (Source: Chartnexus) 


Chart 3: SEG's monthly chart as at Sep 5, 2016 (Source: Sahreinvestor.com)

Conclusion

Based on poor financial performance, unattractive valuation & potentially negative technical outlook, SEG is now rated a SELL or AVOID.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.