The closest peers that could find would be the newly listed RAMSSOL, CENSOF and probably MICROLN. The PE ratio for these companies are 37.05 times, 9.15 times and 38.32 times whereas ARBB is only 4.01 times currently. On average, ARBB should deserve an 18.00 (conservative basis) times PE ratio to 24.01 times PE ratio (fair value) and 30.00 times in bull scenarios. Hence, the share price should be:
18.00 times PE ratio under maximum dilution – 39.0 cents
24.01 times PE ratio under maximum dilution – 52.0 cents
30.00 times PE ratio under maximum dilution – 65.0 cents
In order words, ARBB is being traded at a high margin of safety
The golden rule of investing in value stock is the profitability of the company. Although that might not be the case from some market leader, but commonly, a company needs to be profitable before it could reward shareholders. So, is ARBB profitable? Let’s take a look at their 5 years revenue and net profit trend.
FYE2017 – RM11.4 million
FYE2018 – RM15.2 million
FYE2019 – RM102.6 million
FYE2020 – RM219.4 million
FYE2021 – RM309.2 million
FY2022 – RM313.4 million
For those who are new to ARBB, the increase in revenue is mainly caused by a shift in core business model. ARBB had evolved from a traditional lumber upstream player to an enterprise solution provider as well as IoT player. But again, revenue doesn’t prove anything. What about their bottom line?
Net Profit After Tax
FYE2017 – (RM3.6 million)
FYE2018 – RM4.2 million
FYE2019 – RM34.7 million
FYE2020 – RM43.4 million
FYE2021 – RM74.2 million
FYE2022 – RM18.7 million
It seems like the turnaround of core business from timber to a technology company had really paid off.
The group's revenue was 14.5% higher at RM12.18bil.
"We kicked off FY2023 on a good note, against the backdrop of very trying economic conditions.
"The Industrial business has seen strong growth with a 35 per cent jump in the first quarter. This was due mainly to higher demand for parts with our customers’ backlogged maintenance work coming in, and higher parts prices in Australasia," said Jeffri.
Sime Darby Bhd expects FY23 to be a challenging year as its first quarter results were dampened by weakening consumer sentiment for its motors division in China.
During the quarter, the group posted a net profit of RM207mil, down from RM236mil in the same quarter last year as it experienced lower margins from its China operations.
"The Motors division was impacted by market sentiment, which resulted in lower margins for higher volume. However, improved results from Malaysia and Australasia were able to help mitigate the impact from China," said group CEO Datuk Jeffri Salim Davidson in a statement.