FY19 within expectations
4QFY19 earnings dropped 50% y-o-y , dragged by increased competition
FY19 earnings within expectations
Challenging outlook due to higher imported tinplates, expiry of anti-dumping duties
Maintain HOLD with RM5.30 TP
Earnings declined y-o-y, dragged by lower sales and narrower margin. Perstima (PER) reported 4QFY19 earnings of RM6.5m (-50% y-o-y, -36% q-o-q) dragged by; (1) lower revenue (-1.2% y-o-y, -3% q-o-q) and, (2) reduced 4QFY19 gross profit (GP) margin of 5.5% (4QFY18: 7.1%; 3QFY19: 6.4%).
Within expectations. We are not surprised by the weak 4QFY19 results. As highlighted in our previous report, increased competition arising from the expiry of antidumping duties on 15 November 2018 and increased overseas imports have adversely affect PER’s growth and profitability. As such, we expected the relatively weak 4QFY19 results. FY19 earnings of RM41m were within our expectations.
Still anticipating a challenging environment. We expect the operating environment to remain challenging and competitive. The expiry of anti-dumping duties, volatility of the Ringgit against the US Dollar (USD) and increased overseas imports are expected to continue impacting the group’s growth and profitability. To recap, the authorities imposed anti-dumping duties of up to 9.78% on the export prices of electrolytic tinplates from Korea and China. The duration of the anti-dumping duties was from 16 November 2013 to 15 November 2018. As such, the expiry of anti-dumping duties on 15 November 2018 have re-intensified the competition.
Valuation and Recommendation
Maintain HOLD with TP RM5.30 TP. We maintain our earnings forecasts for PER. We maintain our HOLD recommendation for the group with an unchanged target price (TP) of RM5.30, pegging to a 12x CY19 price-toearnings (PE).
Source: Alliance Research - 30 May 2019