Deleum: Earnings Recovered

Results Update

For QE30/6/2019, Deleum returned to profitability after it went into the red in the immediate preceding quarter, QE31/3/2019. It reported a net profit of RM8.7 million as compared to a net loss of RM1.80 million reported in QE31/3/2019. As compared to last year, net profit dropped 5.6% on the back of a 52%-increase in revenue to RM212 million.

Net profit rebounded back q-o-q basis due to stronger segment contributions from both Power and Machinery and Integrated Corrosion Solution segments, offset by lower results from Oilfield Services segment due to margins compression for its slickline services. Share of results of joint venture, which was contributed by the overhaul and repairs of gas turbines, dropped slightly from RM394k to RM356k due to higher overhead expenses incurred on repair and maintenance works in the current quarter. Share of results of associates increased by RM0.2 million as a result of stronger contribution recorded from 2MC in both its dry bulk and liquid mud businesses in the current quarter.


Table: Deleum's last 8 quarterly results 


Graph: Deleum's last 51quarterly results

Financial Position

Deleum's financial position weakened as at 30/6/2019, when compared to last year. Its current ratio dropped from 1.9 times to 1.5 times while total liabilities to equity rose from 0.6 time to 0.9 time. The deterioration in financial position warrants greater caution on this stock.

Valuation

Deleum (closed at RM0.82 yesterday) is now trading at a PE of 14 times (based on EPS of 5.85 sen for the past 4 quarters). At this PER, Deleum is deemed fair. Dividend payment has dropped from 4.5 sen to 3.65 sen- giving the stock a still-decent dividend yield of 4.45%.

Technical Outlook

Deleum share price is resting on the line connecting its lows for the past 10 years. The indicators are fairly weak. If this support is broken, Deleum may revisit the low of July 2017 at RM0.75.


Chart 1: Deleum's monthly chart as at Aug 23, 2019_12.30 (Source: Malaysiastock.biz)


Chart 2: Deleum's weekly chart as at Aug 23, 2019_12.30 (Source: Malaysiastock.biz)

Conclusion

With the improved financial performance and fair valuation, balanced against the weaker financial position & poor technical outlook, I would rate Deleum as a HOLD.

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.

Deleum: Earnings Soared

Results Update

For QE31/3/2016, Deleum's net profit jumped 5-fold q-o-q or 37% y-o-y to RM9 million while its revenue rose 28% q-o-q or 31% y-o-y to RM139 million. Revenue rose q-o-q due to the revenue growth recorded across all segments sustained by higher activity level as customers’ works orders picks up from the traditionally slow activities in the first quarter. Overall pre-tax profit rose due to higher PBT reported by Power & Machinery segment and Oilfield Services segment plus lower pre-tax loss incurred by Integrated Corrusion Solution segment.


Table 1: Deleum's last 8 quarterly results

 
Table 1: Deleum's segmental performance for QE30/6/2018 and QE31/13/2018

Deleum's top-line and bottom-line peaked in FY2014, and since then they have been drifting lower. I believe top-line and bottom-line had already made a trough, and they are poised for recovery.


Graph: Deleum's last 47 quarterly results

Financial Position

Deleum's financial position is deemed healthy as at 30/6/2018. Its current ratio stood at 1.9 times while total liabilities to equity was manageable at 0.6 times. It has a net cash of RM80.7 million or approximately RM0.20 per share.

Valuation

Deleum (closed at RM0.94 yesterday) is now trading at a PE of 10.8 times (based on EPS of 8.7 sen for the past 4 quarters). At this PER, Deleum is deemed fair. Dividend payment has risen from 3.25 sen to 4.5 sen- giving the stock a decent dividend yield of 4.8%.

Technical Outlook

Deleum share price is still finding its bottom after a long decline from the peak at RM2.60 in 2016. The upside breakout above the 30-month moving average line could not sustain (see the month chart).


Chart 1: Deleum's monthly chart as at Aug 21, 2018 (Source: Shareinvestor.com)

The intermediate uptrend line, SS was also violated in late May. Immediate support and resistance are at RM0.90 and RM1.05, respectively.


Chart 2: Deleum's weekly chart as at Aug 21, 2018 (Source: Shareinvestor.com)

Conclusion

Based on decent financial performance & position and reasonable valuation, Deleum is good stock for long-term investment. However its technical outlook is negative- a problem which may take sometimes to work out. Rating kept at HOLD.

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.

Deleum: Down But Not Out Yet

Recent Financial Results (cr1.53, gr 0.93)

For QE31/3/2016, Deleum's net profit dropped by 26% q-o-q or 28% y-o-y to RM6 million while its revenue was mix- declined by 25% q-o-q but rose by 12% y-o-y to RM151 million.


Table 1: Deleum's last 8 quarterly results

Profits dropped q-o-q due to Power and Machinery segment recording a RM37 million drop in revenue which resulted in a RM9 million drop in profit contribution.


Table 2: Deleum's segmental performance for QE31/3/2016 & QE31/3/2015
 
Compared to last year, profits improved due to lower loss incurred by Integrated Corrosion Solution segment (from RM3.57 million to RM0.23 million).

 
Table 3: Deleum's segmental performance for QE31/3/2016 & QE31/12/2015

Despite the extremely challenging operating environment, Deleum was able to stay profitable due to steady revenue while sacrificing profit margin when necessary.


Chart 1: Deleum's last 38 quarterly results

Financial Position

Deleum's financial position is deemed acceptable as at 31/3/2016. Its current ratio stood at 1.5 times while total liabilities to equity has risen substantially to 0.9 times.

Valuation

Deleum (closed at RM1.16 yesterday) is now trading at a PE of 10.7 times (based on EPS of 10.8 sen for FY2012). At this PER, Deleum is deemed fair. Dividend payment has understandably dropped from 7.5 sen p.s. to 5.5 sen p.s.. At this reduced amount, the dividend yield is at 4.7%.

Technical Outlook

Deleum is poised to break above its intermediate downtrend line at RM1.20. See Chart 2.


Chart 2: Deleum's weekly chart as at May 19, 2016 (Source: Shareinvestor.com)
 
It is still trading above its long-term uptrend line at RM0.95-1.00. see Chart 3.


Chart 3: Deleum's monthly chart as at May 19, 2016 (Source: Shareinvestor.com)

Conclusion

Based on decent financial performance & position, reasoanble valuation & positive technical outlook, Deleum is good stock for long-term investment.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Deleum.