Presbhd: More Than A Sharp Rebound Is Needed

Result Update

In QE30/9/2017, Presbhd's net profit dropped 21% q-o-q but rose more than 5-fold to RM4.6 million while revenue dropped 12% q-o-q but rose nearly 2-fold to RM48 million. Revenue was RM6.7 million or 12% lower than the preceding quarter due to lower contribution Software & Services. PBT rose RM1.2 million or 17% higher than the preceding quarter mainly due to contribution from Concession segment.


 Table: Presbhd's 8 quarters' P&L


 Graph: Presbhd's 20 quarters' P&L

Latest Financial Position

As at 30/9/2017, Presbhd's financial position is deemed satisfactory with current ratio at 3.8x and gearing ratio at 0.4x.

Valuation 

Presbhd (closed at RM1.35 last Friday) is now trading at a PER of 44x (based on last 4 quarters EPS of 3.1 sen). The fair value of this stock is given by DCF absolute valuation method that takes into account the new SKIN contract that it has secured. In an earlier post, I have noted that Presbhd was valued by AMInvestment and Public Investment Bank at around RM3.00. Thus Presbhd is deemed fairly attractive at the current price of RM1.35.

Technical Outlook

Presbhd has a negative technical outlook. Despite the sharp rebound on Friday, it is still too early to say that the worst is over for the stock. Its immediate support is at RM1.30 and its immediate resistance is at RM1.50. We will have to wait and see how far this rebound can go.

Chart: Presbhd's weekly chart as at Nov 24, 2017 (Source: Malaysiastock.biz)

Conclusion

Based on satisfactory financial performance & position, and fairly attractive valuation, Presbhd is considered a good stock for long-term investment. The main concern is the weak technical outlook which may lead to further price weakness in the near term. In view of this, you should exercise careful discretion if you wish to add this stock to your portfolio.

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.