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ARBB (7181) ATURMAJU RESOURCES BHD - Surprised Earnings Factor?

In my sharing yesterday, I've discussed about the technical prospects of ARB Berhad (7181). Today, We will have brief study on the company's latest quarterly report and the general market reaction to the results.

First of all, we know that the current trend in KLSE is – whenever a company deliver good results (or within expectation), the share price would fall in the second day. ARB Berhad announced their quarterly results in the noon-break session in today’s trading session, and surprisingly, the price did not fall below the key support point RM 0.300!

This could mean that the market’s scepticism on ARB Berhad is growing lesser and lesser with the company proving their earnings capabilities in this quarter. Let’s look on the key notes on the company’s latest results.

    The top line (or revenue) increased drastically from RM 33.9 Million to RM 58.3 Million despite we are still under the impact of COVID-19. The bottom line, however, did not grow as quick as the revenue, but still gives very promising earnings, in which they grew from RM 8.2 Million to RM 8.4 Million.
    The top and bottom line increase was mainly supported by the growth in ERP & IoT sector.
    Also, the 9 months ended cash flow statement of the company shows that ARB Berhad had delivered positive operating cash flow in this quarter, as compared to a major deficit in cash flow of RM 15.7 Million in FY 2020 Q3.
    No dividends were declared by the company as of now, but according to one of my friends who claims to have good info, the company might declare dividend in the next financial year, but... who knows?
    The company had incorporated a indirect wholly-owned subsidiary under the name of ARB Cloud Sdn Bhd.

Actually, the emerge of the new subsidiary piqued my interest. Is ARB Berhad venturing into cloud business?

But that is not the important part.

Dated 24/11/2020, the company announced that they would strike a deal with the China Titan Class company, China Unicom – which in FY 2019 achieved a revenue of 264.4 Billion RMB or equivalent to RM 164.9 Billion!


In the press release, the subsidiary of ARB Berhad – Arbiot Sdn. Bhd. will collaborate where ARB Berhad will contribute its IT offering solutions to the projects of China Unicom 5G business, construction of telecommunication towers as well as buildings.

I know, I’m just as sceptical as you are. However, I believe in stock prices more than anything. If the deal was just another hoax, the rally would die off right today. But instead, despite of 1,100 companies closed with a lower price today, ARB managed to stay flat! That, is certainly an impressive feat.

Nevertheless, ARB Berhad is still undervalued to date. Would I buy the company? As I shared yesterday, I’ve initiated a 10% portfolio position into ARB Berhad. Depending on how this deal would work out, I would increase the stakes in this “bet” !

*P/S: It would be a relatively safe bet, though.


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