ARBB: A Promising Small Cap Stock

Background

ARB Berhad ("ARBB") is involved in the manufacture and sales of wood products primarily in Malaysia. It also engages in the provision of scows and tug boats hiring services; consulting services for project management; management services; and timber contracting activities. In addition, the company is involved in reselling customized enterprise resource planning software system and information technology related services.

Results Update

In QE31/12/2020, ARBB's net profit rose 135% q-o-q or 54% y-o-y to RM19.7 million while revenue rose 24% q-o-q or 61% y-o-y to RM72.5 million. The increase in revenue is contributed by Enterprise Resource Planning (ERP) and Internet of Things (IoT) segments. ERP segment is involved in designing and reselling of customised ERP solutions, whereas IoT segment involves in integrated solutions in system (IoT SEPCM). 

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

Graph: ARBB's last 58 quarters' of P&L

Financial Position

As at 31/12/2020, ARBB's financial position is deemed satisfactory with current ratio at 6.3 times while Total Liabilities to Total Equity stood at 0.4 times.

Valuation

ARBB (at yesterday's closing price of RM0.335) is now trading at a PE of 3.1 times (based on last 4 quarters' EPS of 10.87 sen). At this PE, ARBB is deemed fairly attractively.

Technical Analysis

ARBB is poised to break above its downtrend line, RR at RM0.33-0.34.

Chart 1: ARBB's daily chart as at Feb 15, 2021 (Source: Malaysiastock.biz)

Chart 2: ARBB's weekly chart as at Feb 15, 2021 (Source: Malaysiastock.biz)

Conclusion

Based on good financial performance & position and attractive valuation, ARBB can be a good stock for medium-term investment. Its potential share price performance will depend on the ability of its share price to go above the immediate downtrend line at RM0.33-0.34. 

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.