Supermx: It Gets Better!

 Result Update

For QE30/9/2020, Supermx's net profit rose nearly 100% q-o-q or more than 30 folds y-o-y to RM790 million while revenue rose 46% q-o-q or 266% y-o-y to RM1.352 billion. In the notes to the Financial Statement, the company explained its spectacular financial performance in these words:

"Supermax has again recorded a new record quarterly financial performance, achieving another historical high performance for the 2nd consecutive quarter. Revenue increased to RM1.352 billion from RM369.9 million from the previous year corresponding quarter. This increase translates to a 265.6% or RM982.6 million increase compared to the corresponding quarter a year ago. Profitability also increased sharply with EBITDA, PBT and PAT margins at its highest ever levels of 78.8%, 77.6% and 60.1% respectively. Comparing to the previous year corresponding quarter, the EBITDA, PBT & PAT has increased by 492.5%, 781.8% and 797.0% respectively."

Table : Supermx's last 8 quarters' P&L

Graph: Supermx's last 56 quarters' P&L

Valuation

Supermx (closed at RM9.78 yesterday) is now trading at a PER of 19.7x (based on last 4 quarters' adjusted EPS of 49.74 sen). If we annualized the last 2 quarterly EPS of 46 sen to arrive at a full-year EPS of  92 sen, then its PER will be lowered to 10.6 times. However, I believe to compute PER based on the annualized EPS of 92 sen may be too generous if we looked ahead to the normalization of profit due to increased supply of gloves (as a result of increased capacity) as well as lower demand if Covid-19 pandemic were to subside. This will be a tough judgement call for analysts and investors.

Technical Outlook

Supermx share price is well-supported by the intermediate uptrend line, SS at RM8.80 while the intermediate downtrend line, RR will cap its further upside at RM10.80. Given the strong earnings numbers, I think we may soon see a test of the intermediate downtrend line.

Chart: Supermx's daily chart as at Oct 28, 2020 (Source: Malaysiastock.biz)

Conclusion

Based on excellent financial performance, fairly attractive valuation and still positive technical outlook, Supermx deserved to be upgraded to a BUY.

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.