O'Mighty Capital Articles Archive
Suggest Take Profit on Serba Dinamik before Earnings
See the Original Here
The stock had rallied 32% since last quarter’s report and based on last 4 quarter’s earnings, it currently trades at PE of 15.55 post share capital expansion.
For such a high prospect company, the PE it is trading at is relatively low compared to other companies. All this comes thanks to Q4 2016’s earnings which contributed an EPS of 9.42 cents.
We felt that although the hype strong at the current moment, we think that it might be hard to hit the revenue and earnings of Q4 2016. If there’s no doubt revenue can be expanded further, we still see margins compression to be the biggest drag for this quarter’s earnings.
Revenue Estimate
We think that even though oil and gas sees a strong year, the problem is that SERBADK had registered those revenue when oil started to rebound in 2016. Servicing companies sees a spark in revenue growth when things start to kick in again. Evidently over the course of 2017’s reporting period, we see revenue normalizing once again.
The company’s theme of operating is maintenance and we see a smooth increase rather than a huge spike.
With that in mind, we placed a revenue target for Q4 2017 at RM709.8 million signifying a 3% decline in revenue a year ago.
Earnings Estimate
We assume a 12% net margin bringing the EPS 5.79 cents for Q4 2017. We see higher financing cost and increase in other operating expense lowers this quarter’s margin that eventually led to a lower EPS.
Technical Analysis
See our updated technical analysis here
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