CSCSTEL: Reported a Net Loss!

Results Update

For QE31/12/2018, CSCStel reported a net loss of RM2.1 million on a turnover of RM356 million. Its revenue increased by 5.6% q-o-q mainly due to increase in sales for CRC and GI, but partly offset by lower sales for PPGI and lower key products average selling price by 3.6%.

However, the Group registered a loss before tax of RM4.5 million in this quarter compared with profit before tax of RM3.1 million in preceding quarter due to lower selling price coupled with higher raw material cost in persist keener competition situation.


Table: CSCStel's last 8 quarterly results


Graph: CSCStel's P&L for last 45 quarterly results

Financial Position

As at 31/12/2018, CSCStel's financial position is deemed very healthy with current ratio at 7.8 times and gearing ratio at 0.12 time. It has net cash of RM193 million which is equivalent to RM0.51 per share.

Valuation

CSCStel (RM1.09 as at 11:50 am this morning) has a PER of 18 times (based the last 4 quarters' EPS of 5.9  sen). If the cash balance of RM0.52 per share is deducted from the share price, CSCStel's PER will be reduced to 9.7 times. At this PER multiple, CSCStel is deemed quite attractive. Due to the loss incurred, CSCstel reduced its dividend of 10 sen to 4 sen. As a result, its dividend yield plunged to 3.7%.

Technical Outlook

CSCStel has just broken above its downtrend line at RM1.10 (highlighted in my earlier post). I hope that the share price can stay at or above this level so that the prior downtrend will not continue.


Chart: CSCStel's daily chart as at Feb 26, 2019 (Source: MalaysiaStock.Biz)

Conclusion

Despite poorer 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.