For QE31/1/2016, KESM's net profit dropped by 13% q-o-q but rose 235% y-o-y to RM7 million while revenue was unchanged % q-o-q but rose 13% y-o-y to RM70 million. Profit before tax dropped q-o-q due to depreciation of USD against MYR on USD denominated receivables, as compared to an exchange gain of RM2.1 million in 1QFY2016, offset by a decrease in depreciation by RM0.8 million as certain machinery and test equipment were fully depreciated.
Table: KESM's last 8 quarterly results
Chart 1: KESM's last 42 quarterly results
Valuation
KESM (closed at RM4.16 yesterday) is now trading at a PE of 6.6 times (based on last 4 quarters' EPS of 63.40 sen). While the trailing PER is not high, KESM's forward PER could be higher due to lower earning as the MYR continues to strengthen.
Technical Outlook
From the weekly chart, we can see that KESM has broken below the intermediate uptrend line at RM4.50 in mid-February.
Chart 2: KESM's weekly chart as at Mar 10, 2016 (Source: ShareInvestor.com)
The monthly chart shows MACD is poised to cross below its MACD signal line. The last time, Kesm had such a fantastic rally was in 2000 and after the MACD sell signal flashed, the share price dropped back below RM2.00.
Chart 3: KESM's monthly chart as at Mar 10, 2016 (Source: ShareInvestor.com)
Conclusion
Based on anticipated poorer financial performance and signs of weakness in technical outlook, KESM is now rated as a SELL ON 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, KESM.
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