FIGURE 1: ES CERAMICS
TECHNOLOGY BHD LAST 5 YEARS SHARE PRICE TREND
**analysis
based on 2020 annual report.
1. GENERAL
INTRO: the company manufactures and distributes ceramic hand formers. Its
products offerings include examination formers, surgical formers, household
formers, and and balloon. Its formers are for continuous industrial use under
heavy-duty conditions, to withstand the complex processes involving heat and chemicals
to produce gloves. ES Ceramics operates geographically in Malaysia and Thailand
and earns the majority of the revenue from Thailand.
2.
NOTABLE
POINTS:
a. The Group’s core business segment is
manufacturing of hand formers or glove molds. The Group’s manufacturing plants are
located in Ipoh City, Perak and Sadao City, Songkhla Province, Thailand
respectively. In Thailand, the factory produce mainly examination formers,
surgical formers, household formers and industrial formers as well as custom
made formers whereas the plant in Ipoh, Malaysia focuses on the manufacture of
examination formers.
b. During FYE 2020, the Group has reported a
revenue of RM 35 million, an increase of approximately 8% from RM 32 million in
FY2019. The higher revenue recorded was mainly attributable to an increase in
the sales volume. The Group’s net profit attributable to owners of the Company
was RM2.28 million, an increase of 190% as compared with RM0.79 million in the
previous financial year. The profit attributable to owners of the Company has improved
as compared to year 2019. The increase was mainly due to strong market demand
and better products mix.
3.
IS
THIS COUNTER A STRONG GROWTH STOCK?
a. REVENUE RANGE (RM million): 35.2 million as
reported in 2020 annual report, this is a low revenue company.
b. SHARE PRICE: from 2016-2021, share price surged
from around RM0.16 to a peak of more than RM1.50 at the start of the COVID-19
pandemic and then subsequently dropped back to current level of around RM0.70.
This share price trend is similar to most of other gloves manufacturing
counters, which experienced a surge of share price in tandem with the onset of
the COVID-19 pandemic. The share prices have since reduced back to pre-pandemic
levels.
c. EARNING PER SHARE (EPS): earning per share in
last 5 years was overall fluctuating, which ranged from 0.11 to 3.80 sen.
d. PRICE TO EARNINGS (P/E) RATIO: current P/E ratio
is at 43.63, which shows that ESCERAM’s share price is overvalued compared to
its earnings. The overvaluation may have stemmed from investors being
optimistic about ESCERAM’s future earning potential as a hand former supplier
to gloves manufacturers.
e.
FUTURE POTENTIAL/PROSPECTS: share price expect
to be stable in the next few years.
f. CAPITAL EXPENDITURE (CAPEX): spending on
purchase of new fixed assets and other investments amount to about RM 1.4
million, which is around 2% of total assets.
4.
IS
THIS A STRONG DIVIDEND STOCK?
a. DIVIDEND YIELD: in 2020 financial year, ESCERAM declared
a dividend payout of 0.6 sen per share to shareholders, which amounts to a
dividend yield of 0.83%.
b. DIVIDEND PAYOUT RATIO: The FY2020 dividend
amounts to about 54% of its total earnings.
c. CONSISTENCY: This counter’s dividend payout has
been fairly consistent (dividend paid to shareholders in 4 out of 5 years), the
dividend paid to shareholders in the last five years ranged from 0 to 0.6 sen
per share.
5.
IS
THE MANAGEMENT PERFORMANCE GOOD?
a. RETURN ON EQUITY (ROE): in 2020 financial year, ESCERAM
reported a poor return of shareholders’ equity, at 4.32%. This was significantly
increased to 11% in FY2021 due to the increase in earnings.
b.
COST-TO-INCOME RATIO: the cost-to-income ratio
is 1443%, which is quite high.
c. DEBT-TO-EQUITY (GEARING) RATIO: Its gearing
ratio is at 13%, whereby its debt level is significantly less than its equity,
resulting in a strong and healthy balance sheet.
d. CASH FLOW: cash flow is positive, at around RM 20.19
million, equivalent to RM 0.09 per share.
6.
OTHER
INDICATORS:
a. SUPPORT BY INSTITUTIONAL INVESTORS: this counter
is not well supported by institutional investors, there are only 3 institutional
investors at top 30 major shareholders list, including few investment funds but
not including insurance funds. Its major shareholders are Dato’ Kamal YP Tan (24.68%)
and Wong Fook Lin (16.67%).
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