GCB: Strong Earnings from Lower Material Costs
For QE31/12/2017, GCB's net profit rose 10-fold y-o-y to RM31 million on the back of a 9%-decline in revenue to RM494 million. Compared to the immediate preceding quarter (QE30/9/2017), net profit rose 4% while revenue was lowered by 9%.
Revenue dropped y-o-y mainly due to decrease in sales volume of cocoa solids and overall selling price of cocoa products. The profit before tax rose y-o-y mainly due to improved margin (due to lower bean purchase price) and also unrealized gain derived from commodity future contract.
Table: GCB's last 8 quarterly results
Graph: GCB's last 53 quarterly results
Valuation
GCB (closed at RM1.99 yesterday) is now trading at a trailing PER of 10.7 times (based on last 4 quarters' EPS of 18.65 sen). At this PER, GCB is deemed fairly valued.
Technical Outlook
GCB has broken below its uptrend line, SS at RM2.10 on January 17. In addition it has gone below the 10-week SMA line which has guided the share price higher since June 2017. The technical outlook for GCB is mildly bearish.
Chart 1: GCB's weekly chart as at Feb 12, 2017(Source: Malaysiastock.biz)
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Chart 1: GCB's weekly chart as at Feb 12, 2017(Source: Malaysiastock.biz)
Conclusion
Based on good financial performance and reasonable valuation, GCB is a good stock for long-term investment. However we should be careful not to over-invest in GCB as its technical outlook is mildly negative.
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.
http://nexttrade.blogspot.my/2018/02/gcb-strong-earnings-from-lower-material.html
