Company Background:
Plenitude Berhad is primarily involved in property development and listed in KLSE on year 2003.
Fundamental Analysis:
Since its listing on year 2003, its net profit has increased steadily from RM27.8mil (FY 2003) to RM 89.6mil (FY 2011). Even during the economic downturn on year 2008, Plenitude is able to record a profit of RM 80mil in FY2009, marginally higher than that in FY 2008 (RM 79mil) although the revenue drops from RM 348mil to RM 283mil.
Its trend of net profit attributed to shareholder can be seen from Figure 1:
Figure 1: Net profit attributed to shareholder of Plenitude Berhad from year 1999 to year 2011.
As illustrated from Figure 1, Plenitude Berhad has demonstrated its capability in generating an uptrending trend of net profit from FY2003 to FY2011. Its relatively defensive business strategy as compared to other property developers in ensuring low level of borrowings (Interest / Operating Profit < 0.5% since its listing) is perhaps one of the key factors in keeping its profitability (Net Profit/Revenue) at a comfortable level (from 22% to 28%).
On the other hand, it is worth to have a look on its trend of revenue, as reported in Figure 2:
Figure 2: Total revenue of Plenitude Berhad from year 2004 to year 2011.
It can be observed that after the economic crisis happened in year 2008, Plenitude has been experiencing a wiggling trend of revenue generation. Although Plenitude is able to maintain its uptrending trend of net profit (see Figure 1) while experiencing an uneven trend of revenue, this is not a good sign and we shall be cautious on it. Let us have a look on its inventory level on year 2003 - 2011 in Figure 3:
Figure 3: Inventory level of Plenitude Berhad from year 2004 to year 2011.
Plenitude has a maximum inventory level of 18 mil (FY 2008), and it is deteriorating since then. This is not a healthy sign in maintaining its growing momentum of net profit. As quoted from its latest quarterly report (3Q 2012), the management has highlighted that no further revenue to be recognized arising from the completion of Batu Ferringhi Condominium and Phase 14 Double Storey Terrace Houses in Taman Desa Tebrau. Furthermore, the management anticipates a cautious outlook ahead due to the uncertainty in global economy.
Considering its PER on yearly basis, it can be summarised in the following table, Table 1. The PER is derived based on the closing share price at the end of the year.
Table 1: PER of Plenitude Berhad
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Year |
2011 |
2010 |
2009 |
2008 |
2007 |
2006 |
2005 |
2004 |
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PER |
5.9 |
6.9 |
4.5 |
3.1 |
6.3 |
3.9 |
3.4 |
3.9 |
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As seen from Table 1, the share of Plenitude seems to be undermanding all the while, with its maximum PER is only 6.9 on year 2010. By assuming its net profit on 4Q 2012 to be comparable of that on 3Q 2012, its net profit on year 2012 would be around RM 64 mil which translates into EPS of RM0.23. By assuming that Plenitude is able to enjoy its maximum historical PER (i.e. 6.9) on year 2012, the share price of Plenitude would be RM 1.59.
Technical Analysis
As seen from Figure 4, the share price has been traded below its moving average line and meanwhile the width of the Bollinger Band is widening. This indicates that there is a big possibility of weakening of share price in the near future.
Suggestion
Undoubtedly, Plenitude Berhad is a fundamentally sound company proven by its strong balance sheet. However, by considering its possible weakening of net profit in the near future and bad technical outlook, we shall take a cautious outlook on this stock.
