Results Update

PMetal's net profit increased by 38& q-o-q from RM9.2 million to RM12.6 million. This was achieved on the back of a 9%-increase in turnover from RM306 million to RM335 million. The improved performance was due to the contribution from the operation of its Mukah Smelting Plant in Sarawak.

PMetal is putting behind the 2 loss-making quarters, i.e. QE31/12/2008 when it incurred net loss of RM23.1 million due mainly to forex losses of RM16.4 million and QE31/3/2009 when it made provision for inventory impairment loss as aluminium prices deteriorated as well as additional cost to re-start a smelting plant in China.


Table: PMetal's last 8 quarterly results


Chart 1: PMetal's last 9 quarterly results

Financial Position

PMetal's financial position is less than satisfactory as at 31/12/2009. Its liquidity position is tight as reflected in its current ratio of 1.04 times, while its leverage position is high as reflected by its ratio of bank borrowings to total equity of 1.52 times.

Valuation

Based on the closing price of RM1.41 as at the end of the morning session & its average quarterly EPS of 3 sen (over the past 3 quarters), PMetal is now trading at a PER of 12 times. At this multiple, PMetal's upside is limited.

Technical Outlook

The reason that I am looking at this stock is that it may have achieved a bullish breakout above the horizontal resistance of RM1.38-40. The shortcoming is that the volume is still not convincing at this point. The next resistance is at RM1.70-75.


Chart 2: PMetal' daily chart as at April 9, 2010_11.45am (Source: Quickcharts)


Chart 3: PMetal' weekly chart as at April 9, 2010_11.45am (Source: Quickcharts)

Conclusion

Based on technical consideration, PMetal could be a good trading BUY.