While Hong Leong Group has recently issue a "Buy" call on Pecca, i would share some of my views on this counter.
*I'm just a newbie in this field and this is just my thoughts. My views are not a buy/sell call. This is just my 2 cents on this counter.
Doing what it does best. But is it enough?
First of all, lets talk about the main business for Pecca. For those who are not aware, Pecca is involved mostly in the car seat for OEM, PDI and REM Market Segments. While Pecca has most of it's profit coming from Perodua, there is a lot of uncertainty clouding Pecca as of this moment.
With the car sales data at 106,000 (as of March 2020), this will pose a big challenge to Pecca. With car sales not doing as well, Pecca's revenue for this year will definitely take a hit. With such heavy reliance on car sales data, it is hard to see if there is any growth for revenue.
Below table shows a y-o-y car sales vs Pecca's net revenue.
One thing to note is that Pecca produces leather seats for cars. With
the demand shifting for leather seats, as more and more consumers opting
for basic spec model, this would impact Pecca on the shorter term as well.
Mark of a new chapter - venturing into PPE
As PPE becomes the next big thing in the market, more and more companies are venturing into PPE business. As per the annual report in June 2019, Pecca was holding RM92mil in cash and cash equivalents. Utilising the cash to grow in another business venture is truly something that Pecca should consider. However, is PPE the right field to venture into now?
Not only that, production for PPE is only expected to commence in June 30,2021 (The Star). It is reported that the company will allocate RM2mil for capital expenditure purposes. With the new venture and expansion into PPE, will the dividend yield be impacted? On top of that, will this be too late we're receiving more and more news on the vaccine each day? or it is just another party joining in on the "PPE Hype Train".
Technical Chart
With that said, as per Pecca's chart, the stock is rebounding from its March's low of RM0.70. As of the time of the writing of this article, Pecca closes at RM0.90 (24/7/2020).
With the closing of RM0.90, the chart is currently standing above its 7,14,100 Moving Average. While this is a good sign, we'll see the stock retesting it's resistance of RM0.95 again. Should it breakout the price of RM0.95, we will expect to see a further run up.
However, in the short term, there is not much potential upside for me. I'll revisit this stock again only if there is a breakout and more buying signal is shown.
Feel free to drop me a message/comment below for your input. Hopefully we can have a healthy discussion on this counter.
https://klse.i3investor.com/blogs/Shouldilookatit/2020-07-24-story-h1510698344-Is_venturing_into_PPE_a_good_option.jsp
*I'm just a newbie in this field and this is just my thoughts. My views are not a buy/sell call. This is just my 2 cents on this counter.
Doing what it does best. But is it enough?
First of all, lets talk about the main business for Pecca. For those who are not aware, Pecca is involved mostly in the car seat for OEM, PDI and REM Market Segments. While Pecca has most of it's profit coming from Perodua, there is a lot of uncertainty clouding Pecca as of this moment.
With the car sales data at 106,000 (as of March 2020), this will pose a big challenge to Pecca. With car sales not doing as well, Pecca's revenue for this year will definitely take a hit. With such heavy reliance on car sales data, it is hard to see if there is any growth for revenue.
Below table shows a y-o-y car sales vs Pecca's net revenue.
| Year | Car Sales Data | Pecca's Net Revenue (RM'000) |
| 2016 | 580,085 | 14,446 |
| 2017 | 576,625 | 14,538 |
| 2018 | 598,714 | 10,078 |
| 2019 | 604,287 | 16,672 |
Mark of a new chapter - venturing into PPE
As PPE becomes the next big thing in the market, more and more companies are venturing into PPE business. As per the annual report in June 2019, Pecca was holding RM92mil in cash and cash equivalents. Utilising the cash to grow in another business venture is truly something that Pecca should consider. However, is PPE the right field to venture into now?
Not only that, production for PPE is only expected to commence in June 30,2021 (The Star). It is reported that the company will allocate RM2mil for capital expenditure purposes. With the new venture and expansion into PPE, will the dividend yield be impacted? On top of that, will this be too late we're receiving more and more news on the vaccine each day? or it is just another party joining in on the "PPE Hype Train".
Technical Chart
With that said, as per Pecca's chart, the stock is rebounding from its March's low of RM0.70. As of the time of the writing of this article, Pecca closes at RM0.90 (24/7/2020).
With the closing of RM0.90, the chart is currently standing above its 7,14,100 Moving Average. While this is a good sign, we'll see the stock retesting it's resistance of RM0.95 again. Should it breakout the price of RM0.95, we will expect to see a further run up.
However, in the short term, there is not much potential upside for me. I'll revisit this stock again only if there is a breakout and more buying signal is shown.
Feel free to drop me a message/comment below for your input. Hopefully we can have a healthy discussion on this counter.
https://klse.i3investor.com/blogs/Shouldilookatit/2020-07-24-story-h1510698344-Is_venturing_into_PPE_a_good_option.jsp
