Main Reason:
Compared with the same quarter last year, ARBB's turnover increased by 792.7%, mainly contributing to IT business, about 99.7%. This also led to a rise in profits.

Compared with the previous quarter, the 2019 Q3 turnover mainly contributed to ARB Development Sdn Bhd and ARBBOIT Sdn Bhd.

The two subsidiaries mainly sell ERP (Enterprise Resource Planning) software, IOT, Internet and consulting services.

Future Prospect:
Previously ARBB was a wood-related business that was suspended during the quarter but will be relaunched again in Dec 2019.

For the IT department, the subsidiary ARB Development Sdn. Bhd. already has a contract and has already started in 2019 Q3. The contract is expected to be worth approximately USD 20mil. Management believes that it will attract more potential and interested customers in the future.

EPS:
At 2019 Q3, ARBB's profit was 3.54 cents recorded on RM 8.3m EPS. Compared to the previous quarter, ARBB earned up to RM 8.6m, but EPS recorded 6.54 cents.

Almost the same profit, but the EPS is so much different. The main reason is that too many "Conversation of Preference Share" caused the EPS to be diluted.

Although the company's earnings are good, for long-term EPS dilution, this will adversely affect the stock price. After all, more and more shares will lead to lower and lower EPS. In theory, the stock price will gradually decline.

To understand the further detail on the ARBB Preference Share conversion:

Preference Share is considering a stock for the shareholders. Usually preferred stocks have some special offers, such as dividends.

Preference stocks are not equal to ordinary shares. Therefore, EPS does not need to be included in Preference stock.

And since earnings per share (EPS) is a measure used to measure the return on ordinary stock. Therefore, stock exchange websites and software in the calculation of EPS will not be included with the Preference stock.

ARBB has released a maximum of 1,008,150,000 preferred shares on Dec 18, and shareholders were able to convert into (1) 20 Preference shares convert into 1 ordinary share or (2) conversion price of 20 cent per Preference Share.

In the past few months, shareholders have been converted Preference shares into ordinary shares at 20 cents. It has already converted 179,666,400 units, and balance of 828,483,600 units.

As of today, ARBB's shares are 246,876,400 units, assuming the remaining 828,483,600 Preference shares are converted into ordinary stock. ARBB's shares will be as high as 1,075,360,000 units.

In the latest 4 quarters, the company's profit is 26.943m, the number of shares is 246.8m, and the EPS will be 10.91 cents. Calculated at a price of 38.5 cents, PE will be 3.53

If the company can remain its performance in 3Q19 (8.3m), it will be as high as 33mil in the whole year. Based on the maximum number of shares (1,075,360,000), the EPS will be 3.09 cents, the stock price is 38.5 cents, and the PE is 12.48.

Louis Yap

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