Results Update

PMetal has just announced its results for QE31/3/2010. Its net profit increased by 157% q-o-q from RM12.6 million to RM32.4 million, while turnover increased by 18.0% from RM335 million to RM395 million. Compared to the previous corresponding quarter (QE31/3/2009), PMetal has turnaround from a net loss of RM8.8 million on the back of a 53%-increase in turnover from RM258 million. Higher revenue was mainly due to the contribution from the smelting plant in Mukah, Sarawak, which commenced operations on November 2009. PMetal's bottom-line for QE31/3/2010 includes a negative goodwill of RM18.0 million arising from the acquisition of equity share from the minority interest. If this exceptional item is excluded, its pre-tax profit would be about RM22.6 million as compared to RM22.3 million recorded in the immediate preceding quarter (QE31/12/2009).


Table 1: PMetal's last 8 quarterly results


Chart 1: PMetal's 10 quarterly results

Valuation

PMetal (closed at RM1.39 yesterday) is now trading at a PER of 7.5 times (based on last 4 quarters' EPS of 18.6 sen). If we exclude the negative goodwill of RM18 million, the last 4 quarters' EPS would be about 14 sen. On this basis, PMetal's PER would be about 10 times. If we valued PMetal at a PER of 12 times, then its fair value would be about RM1.68.

Technical Outlook

PMetal has tested its uptrend line support at RM1.33. It should also get good support from the 40-week SMA line (equivalent to 200-day SMA line) at RM1.28.


Chart 2: PMetal's daily chart as at May 31, 2010 (Source: Quickcharts)


Chart 3: PMetal's weekly chart as at May 31, 2010 (Source: Quickcharts)

Conclusion

Based on good financial performance, reasonable valuation & positive technical outlook, PMetal could be a good stock for medium-term investment.