HIGHLIGHTS
- Excellent growth in revenue and profits
- Revised fair value from RM 3.95 to RM 4.05
ANALYSIS
- Excellent growth in revenue and earnings. Revenues achieved 13.1% growth qoq and 7.0% YTD while PBT registered a growth of 84.4% yoy and 74.1% YTD. The Group recorded higher sales for all its services.
- Employee’s benefit expenses increased RM 1.6 million (7%) on weakening MYR/CNY forex, depreciation expense was lower by RM 1 million due to fully depreciated assets and exchange loss of RM 1.2 million from USD/MYR depreciation in this quarter.
- Looking forward, the Group intends to continue to develop its core test capabilities with a long term plan to provide its services for the automotive market.
VALUATION
Revised fair value of RM 4.05 based on a
10-Y DCF valuation justified by; (i) 8% supernormal growth (ii) 8%
required return (iii) 1% terminal growth. At current price of RM 4.34,
implied margin of safety is -6.7%. Upgrade to FULLY VALUED.
Thank you.
Shaun Loong
Disclosure: At time of publication, I own stocks in KESM.
KESM (9334) - KESM Quarterly Results FY2016Q2
https://megamicrocaps.wordpress.com/2016/03/11/kesm-quarterly-review-fy2016q2/
