Fitters: Earnings Rebounded

Result Update

In QE31/12/2018, Fitters's net profit rose 46% q-o-q to RM7.3 million on the back of a 2%-increase in revenue to RM100 million.Pre-tax profit rose 65% q-o-q due to:

• Fire Services division recorded a profit of RM1.9 million as compared to RM0.5 million in the third quarter of FYE 2018 due to recognition of project variation orders of certain projects.
• Property, Development & Construction division recorded a profit of RM7.8 million as compared to RM5.6 million in the previous quarter contributed from the work progress of a contract awarded in FYE2017.
• HYPRO® PVC-O Pipes Manufacturing & Distribution Division, recorded a profit of RM69K as compared to a loss of RM1.1 million in the third quarter due to increase in sales.

These improved segmental performance offset the weaker performance from Renewable & Waster-To-Energy Division which recorded a loss of RM1.3 million as compared to previous quarter profit of RM1.8 million due to lower crops produced and low demand of crude oil from the overall market. This is further aggravated by an impairment loss on an investment amounting to RM0.8 million.


Table: Fitters's 8 quarterly results


Graph: Fitters's P&L  for last 42 quarterly results

Financial Position

Fitters's financial position is deemed healthy as at Dec 31, 2018 with current ratio at 1.8x and gearing ratio at 0.4x.

Valuation
Fitters (closed at RM0.51 yesterday) is now trading at a trailing PER of 14.7x (based on last 4 quarters' EPS of 3.47 sen). Based on this PER, Fitters is deemed fully valued.

Technical Outlook

Fitters is in a long-term uptrend line, SS with support at RM0.38-0.40. The breakout above the psychological RM0.50 mark - coupled with the expansion in the Bollinger band - may signal the potential uptrend in the stock. This may be driven by positive news flow, such as its PVC-O pipes getting greater acceptance as replacement for the old leaking pipes in many states across the Peninsular Malaysia. For more, go here.

Chart: Fitters's monthly chart as at Feb 27, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance & healthy financial position, Fitters may be a good stock for long-term investment.

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.