Full year PE of 11 is not overvalued but some kancheong spiders are second guessing that the great momentum of earnings increase in the past 2 yrs can't be maintained.
I tell you why the price need correction once a while. this actually give new investor to join in and make the average price of invested higher and old investor to sell out their stock. once the average price is higher, this actually build higher price supporting.
for those who read the income statement and BS, you will see the value....expect next few qtrs pat may inch higher.. a potential to reach eps of 85 cents in next 12 months
interesting, price dropped more than I expected, this is what I would call "headlines" effect, KESM 4Q results was actually decent (if u read the brokers' reports and some analysis articles today) but news highlight yoy drop without mentioning the abnormal items last year or mentioning the full year or qoq increase. opposite the same for CIMB 2Q, results actually came in lower than expectations, but all people read was 36% yoy increase without realising that 2Q15 was an abnormally low base. just an observation, not saying whether KESM good buy or not
My discount cash flow analysis shows that the intrinsic value of KESM was RM9.19 per share, or a wide margin of safety of 39% investing KESM at RM5.59 then
KESM’s share price has risen to the close of RM8.00 a piece on 20th September 2016 now, it has gone up in price by 43%, in just 2 months. Figure 1 below shows its share price movement for the past two years. Note the sharp rise of its share price in the last three to four months. At this price, is it still good to hold or is it better to sell and realize the profit now?
KESM has just released its final quarterly 2016 result on 20th September. Compared to the corresponding quarter last year ended 31st July, revenue increased by 8% from RM68.9m to RM74.5m due to the higher demand for burn-in and test services. Excluding the “other income”, interest and dividend income, the operating income increased by 9% from RM7.94m last year to RM8.67m. Profit before tax, however, reduced by 4% to RM9.37m, mainly due to the foreign exchange gain and reversal of sundry payables total of RM1.9m during the last corresponding quarter. Net profit reduced further by 23% as there was a tax credit for the last corresponding quarter. KESM actually did better in its bottom line this quarter than the last corresponding quarter if we stripped off the abnormal foreign exchange and tax effect.
For the whole year, revenue this year was 9% higher at RM285.7m as a result of higher demand for all services. Operating income, excluding interest and dividend income, and other income, is higher by 73% to RM33.1m. Net profit was 46% higher at RM30.7m. Earnings per share, EPS, for the financial year ended 31th July 2016 is 71.3 sen.
The best thing about the result of this financial year is its good cash flows. Cash flows from operations has increased to RM88.2m, the highest in history. Free cash flows, FCF, is also the best so far as it did not require to spend too much in capital expenses after the last two years of high capital expenses. FCF amounts to RM58.6m, or RM1.36 per share, or a very high cash yield (FCF/MC) of 17%.
ROE and ROIC has improved further to 10.7% and 14.3% respectively, higher than its costs of capitals, indicating a shareholder value maximizing performance. The balance sheet has improved by leaps and bounds with net cash increased to RM81m now, or RM1.88 per share.
The attractiveness of investing in KESM is its reasonable market valuation in every aspect, firm wise or equity wise, except for its low dividend yield of just 0.9%, as shown in Table 1 above, despite its bright near term growth prospect. The enterprise value only 2.9 times its earnings before interest and tax, depreciation and amortization is low. The Cash Yield of 17% is particularly very attractive.
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paperplane2016
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Posted by paperplane2016 > 2016-09-21 10:05 | Report Abuse
yup. I buy little more today. I have KESM as my top exposure now. Even higher than GKENT