Wednesday, 11 June 2014

Prestariang - what's up

Presbhd had a good run in April but started to retrace in May. From a high of RM4.12, the stock price had since retraced to current level of about RM1.80 or equivalent to RM3.60 before ex-bonus. Anticipation was very high among investors especially those new one when bonus issue was announced sometime in February. Many new investors were flocked in hoping to catch the early birds. That's natural and that makes our market very unique. The story of bonus issue excites many people. Those who bought after the bonus issue announcement would be holding the stock, if not already sold by now, at higher cost as compare to those bought before the bonus announcement. Those who bought at higher cost will feel a little uneasy because of the price drop recently.

 

Perhaps, we should ask ourself why need to feel uneasy. Is it because of the many comments now started to crop up saying that it is expensive? or is it because of the latest quarterly results doesn't look so good? or is it because of the 10% price drop from the all-time high? or is it because the stock price did not jump after the bonus issue ex-date? Feeling uneasy is normal and you should, but also never forget to ask this basic question - why I buy this stock in the first place? If you have a very clear answer to this question, you would not feel uneasy as short term price movement is not important. In fact even if you have bought at all-time high of RM4.12, the current price of RM1.80 which is about 10% from the high, is nothing to worry for any long term investor.





Yes, recent quarterly result is not so good but it doesn't means it is not good. Depending where we wanted to benchmark against with, it is still reasonably good in my mind and not to mention the company declared a interim dividend of 1.25 cent. This translates into 86% net dividend payout which is above the company's policy of 50%. I see this as a good sign. Sometime we lose some (lesser good Q1 result, price retraced from all-time high) and sometime we gain some (good dividend payout, more contracts coming soon, etc). Overall, things are still pretty solid.


Many people only see short term story and not long term goal. For a starter, Presbhd's long term goal is to achieve RM1.5 billion market capitalisation by 2017. Read here

 




The following statement by the company's CEO during the briefing on the company's financial results was reported in newspaper:-

 

- Abu said "Q12014 result was the second dip in net profit after Q22011 and it expects a better performance in the second half this year (H2). Revenue was down for the first time in Prestariang's history but we continue to have a healthy profit margin. Even with the decrease in revenue, we managed to contain the costs." "It's a bruise but as a company, you'll see us hopefully bouncing back in H2," he said.

I like the frankness from the CEO.




A private report which I received following the release of the Q1 result, stated the following:-


" .... the results to be stronger in 2HFY2014 when most of the pending projects are approved  ......... Prestariang is in the midst of bidding for a substantial concession-based project. If this materialised, this will provide the company with recurring revenue and hence a re-rating catalyst to the stock. "


Read carefully the last sentence. Many people will only start to believe the stock when the price started to move up. Either you catch the early bird or catch a late bird which may end up buying at higher price.

 

I have heard many comments telling people to sell the stock because it is expensive now, overrated, and whatnot. Trust no one, not even UncleZ but I am just stating the obvious. Do your evaluation.




 Some intellectual properties owned by Presbhd.






By the way, even the stock price has retraced by about 10%, I am happily counting the dividend that I am going to receive soon.


 Its price closed at RM1.80 on 11.06.2014.



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