Deleum: Earnings Soared

Results Update

For QE31/3/2016, Deleum's net profit jumped 5-fold q-o-q or 37% y-o-y to RM9 million while its revenue rose 28% q-o-q or 31% y-o-y to RM139 million. Revenue rose q-o-q due to the revenue growth recorded across all segments sustained by higher activity level as customers’ works orders picks up from the traditionally slow activities in the first quarter. Overall pre-tax profit rose due to higher PBT reported by Power & Machinery segment and Oilfield Services segment plus lower pre-tax loss incurred by Integrated Corrusion Solution segment.


Table 1: Deleum's last 8 quarterly results

 
Table 1: Deleum's segmental performance for QE30/6/2018 and QE31/13/2018

Deleum's top-line and bottom-line peaked in FY2014, and since then they have been drifting lower. I believe top-line and bottom-line had already made a trough, and they are poised for recovery.


Graph: Deleum's last 47 quarterly results

Financial Position

Deleum's financial position is deemed healthy as at 30/6/2018. Its current ratio stood at 1.9 times while total liabilities to equity was manageable at 0.6 times. It has a net cash of RM80.7 million or approximately RM0.20 per share.

Valuation

Deleum (closed at RM0.94 yesterday) is now trading at a PE of 10.8 times (based on EPS of 8.7 sen for the past 4 quarters). At this PER, Deleum is deemed fair. Dividend payment has risen from 3.25 sen to 4.5 sen- giving the stock a decent dividend yield of 4.8%.

Technical Outlook

Deleum share price is still finding its bottom after a long decline from the peak at RM2.60 in 2016. The upside breakout above the 30-month moving average line could not sustain (see the month chart).


Chart 1: Deleum's monthly chart as at Aug 21, 2018 (Source: Shareinvestor.com)

The intermediate uptrend line, SS was also violated in late May. Immediate support and resistance are at RM0.90 and RM1.05, respectively.


Chart 2: Deleum's weekly chart as at Aug 21, 2018 (Source: Shareinvestor.com)

Conclusion

Based on decent financial performance & position and reasonable valuation, Deleum is good stock for long-term investment. However its technical outlook is negative- a problem which may take sometimes to work out. Rating kept at HOLD.

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.