COMMENTS ON SALCON BERHAD (6857)

FIGURE 1: YTL SALCON BERHAD LAST 5 YEARS SHARE PRICE TREND

 

**analysis based on 2019 annual report.

1.       GENERAL INTRO: SALCON is a leading water and wastewater engineering company, with focus on the investment, design, construction, commissioning, operation and maintenance of water and wastewater treatment plants and ancillary facilities across Asia. It also participated in various projects throughout the Asian region including Sri Lanka, China, Thailand and Vietnam. It also has diversification into technology services, transportation, property development and other businesses.

 

2.       NOTABLE POINTS:

a.       In FY2019, the Group recorded a higher pre-tax loss of RM 7.33 million compared to RM 1.56 million in the previous year due to one-off expenses comprising of capital gains tax in arrears from the disposal of China assets and impairment of investment in an associate company which accounted for RM14.97 million. The Group’s results were also affected by delayed commencement of newly secured contracts, higher cost incurred due to delays in certain ongoing contracts and continued losses in its Property Division.

 

3.       IS THIS COUNTER A STRONG GROWTH STOCK?        

a.       REVENUE RANGE (RM million): 191.2 million as reported in 2019 annual report, this is a low revenue company.

b.      SHARE PRICE: from 2016-2020, share price decreased from around RM0.60 to current level of around RM0.20.

c.       EARNING PER SHARE (EPS): earning per share in last 5 years was overall negative, which ranged from -3.19 to -0.41 sen, indicating the company was making losses in the last five years

d.      PRICE TO EARNINGS (P/E) RATIO: current P/E ratio is at -56.5

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 11.1 million, which is around 2% of total assets.

 

4.       IS THIS A STRONG DIVIDEND STOCK?             

a.       DIVIDEND YIELD: in 2019 financial year, SALCON did not declare a dividend payout to shareholders, instead, a dividend share was issued.

b.      DIVIDEND PAYOUT RATIO: N/A.

c.       CONSISTENCY: the dividend payout was not consistent, the dividend paid to shareholders in the last five years ranged from 0 to 2 sen.

 

5.       IS THE MANAGEMENT PERFORMANCE GOOD?

a.       RETURN ON EQUITY (ROE): in 2019 financial year, SALCON reported a poor return of shareholders’ equity, at -2.02%. Its ROE in the last five years is also quite low, ranged from -5.2 to 2.45%.

b.      COST-TO-INCOME RATIO: N/A.

 

6.       OTHER INDICATORS:

a.       CASH FLOW: cash flow is positive, around RM 119.8 million, equivalent to RM 0.15 per share.

b.      SUPPORT BY INSTITUTIONAL INVESTORS: this counter is not well supported by institutional investors, there are only institutional investors at top 30 major shareholders list, not including insurance companies/investment funds. Its major shareholders are Naga Muhibah Sdn. Bhd. (11.35%), Infra Tropika Sdn Bhd (7.68%) and Tan Sri Dato’ Tee Tiam Lee (6.57%).

 

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