2015年3月12日星期四

Privasia Technology - 254% Earnings Growth, Order Book Can Last Until 2020


Author: Icon8888   |   Publish date: Mon, 2 Mar 2015, 02:40 PM 



Executive Summary

(a) Privasia is listed on ACE Market. It specialises in IT and telecommunication.

(b) Last Friday, Privasia released its December 2014 quarterly results. Revenue and net profit increased from RM17.9 mil and RM1.03 mil (in September 2014 quarter) to RM28.4 mil and RM3.65 mil, representing growth of 59% and 254% respectively.
The substantial growth was due to higher profit contribution from the Outsourcing & Consulting Division as well as IT & Communication Services. The jump in earnings is purely operational and not due to any exceptional item.

(c) Among all the technology companies that I have studied (ACE and Main Market), Privasia gave me the best impression (too bad I couldn't make up my mind in the past and only started buying this morning in reaction to the sterling financial results).
From their past quarterly results and annual reports, it is obvious that they have a wide range of expertise in IT as well as telecommunication.
Many other companies also claim in their websites they have expertise in various fields. But upon closer inspection, usually it is only a single field they excel in while the others are relatively inactive and do not generate much revenue. 
Privasia is different. Apart from their bread and butter Outsourcing and Consulting Division, their other divisions such as Satelite Technology, E-Procurement, etc also generate substantial revenue and profitability. 
In my opinion, this is a company with substance and can compete effectively in the industry based on own merits and not rely on government for handouts. 

(d) With its formidable technological capability, the group has built up order book of RM151 mil. This is sufficient to last them until 2020 (source : 31 December 2014 quarterly report).

(e) So far so good. The question now is : can the sterling performance be repeated in coming quarters ? What if we buy the shares and next few quarter earnings revert to their long term average of approximately RM1.35 mil per quarter ? Unfortunately, I don't have the answer to the above questions.
You can wait for the dust to settle or you can jump in now to join the gold rush. The decision is yours.

Privasia Technology Berhad (PRTB) Snapshot

Open
0.16
 
Previous Close
0.16
Day High
0.16
 
Day Low
0.16
52 Week High
11/24/14 - 0.20
 
52 Week Low
03/3/14 - 0.10
Market Cap
86.5M
 
Average Volume 10 Days
4.4M
EPS TTM
0.01
 
Shares Outstanding
558.2M
EX-Date
06/24/14
 
P/E TM
10.5x
Dividend
0.0030
 
Dividend Yield
1.94%
 












Privasia Technology Berhad provides ICT and business process outsourcing services in Malaysia. It operates through five segments: Outsourcing and Consulting, E-Procurement, Information and Communication Technologies Distribution, Information and Communication Technologies Services, and Satellite-Based Network Services. 

The group has healthy balance sheets. With net assets of RM80 mil, loans of RM10.4 mil and cash of RM10.4 mil, net gearing is zero.



Quarter Result:
F.Y.QuarterRevenue ('000)Profit before Tax ('000)Profit Attb. to SH ('000)EPS (Cent)NAPS
2014-12-312014-12-3128,4044,8423,6540.660.1400
2014-12-312014-09-3017,8641,7231,0330.180.1400
2014-12-312014-06-3013,7181,2669100.160.1400
2014-12-312014-03-3113,7402,1581,3560.230.1400
2013-12-312013-12-3115,0782,8961,7880.31-
2013-12-312013-09-3013,9542,0497690.130.1300
2013-12-312013-06-3014,9662,2761,3510.240.1300
2013-12-312013-03-3114,4202,6821,8360.320.1300
2012-12-312012-12-3120,7132,6231,7410.31-
2012-12-312012-09-3015,1422,9442,1320.380.1200
2012-12-312012-06-3014,2292,1981,3740.260.1200
2012-12-312012-03-3110,5631,116-329-0.060.1200
2011-12-312011-12-3113,7782,3191,9730.35-
2011-12-312011-09-3010,7211,9841,7140.330.1100
2011-12-312011-06-3010,0456934750.100.1100
2011-12-312011-03-3110,0031,1058580.170.1100

As shown is table above, the group reported average net profit of approximately RM1.35 mil per quarter over past 12 quarters (excludes latest quarter spike in proftiability). Based on annualised net profit of RM5.4 mil (being RM1.35 mil x 4) and market cap of RM86.5 mil, long term historical PER is 16 times.

However, latest quarter saw a huge jump in earnings. Based on FY2014 net profit of RM8.36 mil, PER is approximately 10.3 times.

If you annualise the latest quarter net profit of RM5.07 mil, prospective PER will be 4.3 times (based on RM20.28 mil net profit).

The huge jump in earnings is mostly due to higher contribution from the Outsourcing and Consulting ("OSD") division :-



As shown in two tables above, for the quarter ended December 2014, OSD division contributed revenue and operating profit of RM13 mil and RM4.1 mil respectively (by subtracting September figures from December figures).

In normal time, this division contributed on average, revenue and operating profit of RM8.1 mil and RM2.2 mil respectively. As such, Q4 2014 operating profit from OSD is 86% higher than normal time.

CSERV division also saw a huge jump in revenue and earnings in Q4 2014,

According to the company, the OSD division has order book of RM150 mil, sufficient to last until 2020 :-



The company paid 0.3 sen dividend in 2013 and 2014. Based on 16 sen share price, dividend yield is 1.87%.




In my opinion, due to improved profitability, there is a possibility that the company will increase dividend payout in the future.

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Appendix 1 - Details of Privasia Group's Operations