CSCSTEL: Bullish Breakout

Results Update

For QE30/9/2018, CSCStel's net profit dropped 71% q-o-q or 79% y-o-y to RM3 million while revenue was mixed - down 1.7% q-o-q or up 3.4% y-o-y to RM337 million. The Group’s revenue has decreased by 1.7% q-o-q due to decrease in total sales volume and average selling price. The Group achieve profit before tax of RM3.8 million this quarter compared with a profit before tax of RM13.5 in preceding quarter due to higher raw material cost and transportation cost.

[Note: CSCTEL's result for QE30/9/2018 was announced on November 28.]


Table: CSCStel's last 8 quarterly results


Graph: CSCStel's P&L for last 44 quarterly results

Financial Position

As at 30/6/2018, CSCStel's financial position is deemed very healthy with current ratio at 7.5 times and gearing ratio at 0.13 time. It has net cash of RM160 million which is equivalent to RM0.42 per share.

Valuation

CSCStel (closed at RM1.18 last Friday) has a PER of 11.2 times (based the last 4 quarters' EPS of 10.5  sen). If the cash balance of RM0.42 per share is deducted from the share price, CSCStel's PER will be reduced to 7.2 times. At this PER multiple, CSCStel is deemed quite attractive. In addition, if CSCstel can maintain its dividend payment of 10 sen a year, its dividend yield is very attractive at 8.4% based on current price of RM1.18.

Technical Outlook

CSCStel has just broken above its downtrend line at RM1.10.


Chart 1: CSCStel's daily chart as at Feb 14, 2019 (Source: MalaysiaStock.Biz)

If you look at the monthly chart, CSCtel price decline may bring the share price to its long-term uptrend line support at RM1.00.


Chart 2: CSCStel's monthly chart as at Feb 14, 2019 (Source: MalaysiaStock.Biz)

Conclusion

Despite weaker financial performance, CSCStel is a good stock for long-term investment based on strong financial position, attractive valuation and mildly bullish technical outlook.

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.