Tuesday, May 05, 2015

MISC: Bottom-line ebbed due to exceptional gain in previous quarter

Results Update

For QE31/3/2015, MISC's net profit dropped 49% q-o-q but remained unchanged y-o-y at RM486 million while revenue was up 9% q-o-q & y-o-y to RM2.49 billion. Revenue increased q-o-q due to improved freight rates in Petroleum business and higher revenue from different phases of project construction in Heavy Engineering. PBT dropped 50% q-o-q due to exceptional gain of RM654.5 million from disposal of assets through finance lease recorded in QE31/12/2014 and higher share of profit from JVs & Associated Companies of RM319.9 million recorded in QE31/12/2014 (compared to only RM98.7 million in latest quarter). However the latest quarterly result was not weighed down by impairment charges (unlike QE31/12/2014 which included net impairment reversal of RM358.9 million).


Table: MISC's last 8 quarterly results

 
Chart 1: MISC's last 36 quarterly results

Valuation

MISC (RM9.00 as at 10:00am) is now trading at a PE of 18.4 times (based on last 4 quarterly EPS of 49 sen). At this PE, MISC is deemed fully valued.

Technical Outlook

MISC's uptrend has accelerated in the past 6 months (see Chart 2). It is fast approaching the strong overhead resistance posed by the horizontal line at RM9.50 (see Chart 3).

Chart 2: MISC's weekly chart as at April 30, 2015(Source: ShareInvestor.com)


Chart 3: MISC's monthly chart as at April 30, 2015(Source: ShareInvestor.com)

Conclusion
Based on satisfactory financial performance & positive technical outlook, MISC is a good stock for long-term investment. However, its steady rise in the past 2 years has pushed its valuation significantly. With high PE multiple and strong resistance not far away, MISC's rating should be revised from HOLD to SELL INTO STRENGTH. 

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, MISC.

2 comments:

lai said...

hi Alex,

i have this very sneaky feeling that Gabungan AQRS will be the next Mitra or Gadang.

am i thinking too much?

thanks

Alex Lu said...

Hi lai,

I share your view. I think it is a good buy at RM1.20-1.30.

However, it should be noted that the company's financial position is pretty weak. It has huge trade receivable of RM418 million @31/12/2014 as compared to its revenue of RM534 million for FY2014 (FY2013: RM406 million). That means its debtors' collection period is 1 year (arrived at by dividing the trade receivable by the average of the past 2 years' revenue). It is likely that some of these receivable may not be collectible.

Because of that, its gearing ratio is high at 1.4 times. For more, go to the link below.

To rectify this problem, the company needs to raise its capital by doing a Rights Issue. It needs to do that quickly so that it can put its house in order. However, the market is in doldrums and any company that proposes a Rights Issue would face shareholders' revolt (by selling off their shares). It is a stalemate that is dragging out the share price.


http://disclosure.bursamalaysia.com/FileAccess/apbursaweb/download/?name=EA_FR_Attachments&id=184969