Presbhd: Earnings recovered

Result Update

In QE31/12/2017, Presbhd's profit before tax rose 117% q-o-q or 9-fold y-o-y to RM18 million while revenue rose 48% q-o-q or 191% y-o-y to RM72 million. Revenue rose q-o-q due to higher contribution Software & Services and Concession segments. The Group recorded higher PBT mainly contributed by contribution from Software & Services and Concession segments. The Group's NP dropped q-o-q due to higher tax expenses of RM10.1 million which in turn was due to under-provision of taxation of RM7.78 million and deferred tax charge of RM2.29 million.


 Table: Presbhd's 8 quarters' P&L


 Graph: Presbhd's 21 quarters' P&L

Latest Financial Position

As at 31/12/2017, Presbhd's financial position is deemed satisfactory with current ratio at 2.1x and gearing ratio at 0.5x.

Valuation 

Presbhd (closed at RM1.63 last Friday) is now trading at a PER of 44x (based on last 4 quarters EPS of 3.7 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. Presbhd is valued by AMInvestment at RM2.08, CIMB at RM2.69 and Public Investment Bank at RM2.87.

Technical Outlook

Presbhd is in an intermediate downtrend line, with resistance at RM1.95-2.00. See Chart 1 below. However it may be in a long-term uptrend line with support at RM1.40. See Chart 2.

Chart 1: Presbhd's weekly chart as at Mar 2, 2018 (Source: Shareinvestor.com)


Chart 2: Presbhd's monthly chart as at Mar 2, 2018 (Source: Shareinvestor.com)

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 price weakness in the near term.

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.