Revenue dropped slightly.
Variable cost increased slightly.
Q3 2011 EPS: 3.42 sen
Total Three quarter: 10.59sen
Inventories and Receivable maintains as previous level.
Cash amount reduced due to special dividend.
Borrowing Status: Zero Borrowing
Cash flow statement:
Maintain a very low CAPEX
Paid back some payable.
Business Segments Analysis:
Manufacturing : Profits dropped (~-25%)
Trading & Engineering Services: Profits increased slightly (~+10%)
Note: The core income of OPCOM is still Fiber Optics Manufacturing which contributes ~70% of total profits.
Company Reviews: (From the quarter report)
"Review of Performance
The Group registered revenue of RM33.1 million and profit before tax of RM8.3 million in current quarter as compared to revenue and profit before tax of RM37.3 million and RM12.0 million respectively in the preceding year's corresponding quarter. The revenue had decreased by RM4.2 million as compared to preceding year's corresponding quarter mainly due to slower cables take up by customers in current quarter.
Performance of the respective operating business segments in the current quarter compared to the preceding year's corresponding quarter is as follows:-
Manufacturing - The decrease in revenue by 9% in current quarter was mainly due to reduce in customer's demand for cables.
Trading and Engineering Services - The increase in revenue by 16% in current quarter was mainly due to more supply of materials for cables manufacturing.
Variation of results against the immediate preceding quarter
The Group's revenue increased to RM33.1 million in current quarter as compared to the immediate preceding quarter of RM22.6 million. The Group registered a profit before tax of RM8.3 million in the current quarter as compared to RM6.7 million in the immediate preceding quarter. Sales in immediate preceding quarter was low due to festive season which resulted in lower revenue contribution. The revenue recorded in current quarter increased by RM10.5 million as customer order picked up after the festive season ended.
Performance of the respective operating business segments in the current quarter compared to the immediate preceding
quarter is as follows:-
Manufacturing - The increase in revenue by 48% in current quarter was mainly due to customer order picking up after the festive season ended.Trading and Engineering Services - The increase in revenue by 59% in current quarter was mainly due to customer order picking up after the festive season ended.Other Operations - The revenue contribution in current quarter was consistent with immediate preceding quarter.
ProspectWith the 2-year extension of the existing RM359.6 million FTTH Supply Contract with Telekom Malaysia Berhad in hand, the Board is positive of the Group's performance for the remaining quarter of current financial year."
Note: The extension period is from 20 April 2011 to 19 April 2013. (based on Q42011 report)
OPCOM Future Growing: Depends on the demand of fiber optics. Based on annual report 2011:
"Long Term Evolution (LTE) or commonly marketed as the high speed 4G mobile service is the new high speed mobile broadband standard that is being adopted by mobile service providers in Malaysia. To support LTE with download transmission speed of up to 100 mbps, we believe that the expected fiberisation of the entire wireless broadband infrastructure would create substantial incremental demand for fiber optic cables and systems over the next 5 to 10 years." Annual report 2011
With my estimated EPS of 15sen in the end of this fiscal year, with
1. minimum PE of 8 for OPCOM future grow
2. net cash financial status (35sen per share after excluded the 22.5sen dividend payment)
3. Very low CAPEX requirement annually
4. Strong cash flow
My minimum target price of OPCOM is RM1.20 with PE of 8. This target price is subjected to change from time to time based on industry trend and company performance. The minimum target price is the price proposed personally based on my analysis, study and insight without any professional advice or evidence. It may be adjusted (increased or reduced) based on my personal insight on the industry trend and the company profitability in the future.
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Written by: Xaivier Chia
(P/S: Author has OPCOM shares, the content of this post contains serious conflict of interest. Please don't make any decision based on the content of this article. Readers are advised to do their homework before making any investment or speculation decision.)