Investor on the Street

QL (7084): Quite Ludicrous valuation or Quite Legitimate valuation?

Effulgence
Publish date: Sat, 24 Sep 2022, 04:55 PM

QL (7084) is a Main Market company in the Consumer Products & Services segment. 

QL's business is mainly in Marine products manufacturing (MPM), Integrated livestock farming (ILF), Palm oil and clean energy (POCE) and Convenience store chain (CVS).

Is QL selling at cheap price now?

 

1. Share price you pay now is higher than Price to Book. 

QL's share price is RM 5.02, whilst its net assets is about RM 1.06.

 

2. Best performance in FY2021.

QL's revenue hit all-time high in FY2022, net profit hit all-time high in FY2021, yet share price all-time high was in Oct 2020 around RM7. QL has achieved consecutive revenue per year increase since IPO, which is very rare on Bursa Malaysia.

 

3. Financial Statements. 

QL had positive net cash from operations in most of recentmost 20 quarters. It is usually a net debt company. QL has given dividends annually since IPO.

 

4. Insider dealings.

22.6.2022 Director Mr. Low Teng Lum's spouse bought 5k shares each at RM5.15 and RM5.19. 

13.6.2022 Exec. Chairman Dr. Chia Song Kun gifted his son 150k shares. 

6.4.2022 Director Chia Song Pow's daughter bought 3170 shares at RM5.23. 

17.3.2022 Ruby Technique Sdn Bhd sold 671700 shares at RM4.80. (Indirect interest of Exec. Chairman Dr. Chia Song Kun & Director Mr. Chia Seong FattExec. Chairman Dr. Chia Song Kun's daughter bought 46900 shares, while Director Mr. Chia Seong Fatt's 2 sons bought 30700 shares in total. 

Nov 2021 Pelita Global Sdn Bhd, a company of Exec. Chairman Dr. Chia Song Kun & Director Mr. Chia Seong Fatt & Director Chia Song Pow bought about 1.2mil. shares around RM4.60-RM5. 

Oct 2021 Pelita Global Sdn Bhd bought around 600k shares around RM5-RM5.30. 


Insiders probably think that QL share price is undervalued. 

 

5. PE ratio is around 47.

QL's trailing PE ratio is extremely high. However its rock solid consistent long-term growth might justify the PE, should its growth trajectory continues.

I have indirect shares in QL. Suppose QL produces an average net profit to shareholders of 62mil./quarter, given PE ratio of 40, QL should be worth RM4.08. Averaging net profit to shareholders over the past 20 quarters, (62mil/quarter) with PE ratio of 30, QL would only be worth RM 3.06.

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