Results Update

MISC has just announced its results for QE30/6/2010. Its net profit increased by 118% q-o-q or 83% y-o-y to RM428 million while turnover dropped 1% q-o-q or 16% y-o-y to RM3.27 billion. The improved performance is attributed to better results from the restructured Liner business as well as increased profitability from the Heavy Engineering business.


Table: MISC's last 8 quarterly results

From Chart 1 below, we can see that MISC's turnover has stabilized after a sharp drop in 2008. Bottom-line has shown signs of recovery in the past 3 quarters.


Chart 1: MISC's last 17 quarterly results

Valuation

MISC (closed at RM8.86 yesterday) is now trading at a trailing PER of 42 times. At this multiple, MISC is deemed overvalued.

Technical Outlook

Like a giant oil tanker, MISC moved very slowly. Over the past 18 years, MISC had only rallied twice. Its first rally came at the end of the 1993 bull run and the next bull rally came in 2003-2006. The periods in between are marked by long sideway movement or consolidation (in the form of triangle or double-triangle). I believe MISC is now in such a formation, with prices trapped between RM8.00 & RM10.00.


Chart 2: MISC's monthly chart as at Aug 19, 2010 (Source: Tradesignum)

Conclusion

Based on high valuation & unattractive technical outlook, MISC is a stock to be avoided.