SALUTE - Post Q2 2017 Result

Stand Up and SALUTE!!! You can click HERE to view my post on SALUTE. Today, SALUTE closed all time high at 1.62. February is a peak month full of Quarter Reports~ Now, lets take a look at SALUTE's QR.

1. Fundamental Analysis:

SALUTE Q2 2017 Result [2]

SALUTE announced their Q2 2017 result. Both revenue and net profit reported double digit growth in qoq and yoy[2]. Revenue increased 24% qoq and 34% yoy respectively while net profit increased 27% qoq and 92% yoy respectively. The main reason due to the higher revenue and net profit is due to:

1. Higher Year End Sales and the major contributor of Bluetooth headsets

2. Better absorption of fixed costs arising from the higher volume of production

3. Evaluation and testing cost of new products have tapered down due to stable mass production cycle.

I had studied into the geographical segments of SALUTE sales. North US (80%) still remain the top export countries for SALUTE's products, followed by Europe (10%) and Asia (9%). By just adding up the percentage, foreign exports had already covered more than 99% sales. Meaning to say, SALUTE is in favour to USD strengthening.

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SALUTE is a net cash company with its net cash per share of 0.25. The net profit margin is 12%. If compared to previous quarters, they always maintain their net profit margin at 12%. 

Revenue and Net Profit of SALUTE

In the prospects column, the management assured the investors that currently, they are still continuing to be involved in the design, development and manufacturing of Air-Bar. Air-Bar is a new product category which SALUTE aims to grow in the near future. As usual, they are confident of the financial performance and prospects ending in 30 June 2017 will remain favourable. Actually, i am looking for the statement about the sales of Air-Bar but it is not surfaced out in this Q2. Therefore, i am hopeful that the sales of Air-Bar will be identified in the next QR together with its impact towards the revenue.

In the QR, the management also mentioned that the proposed transfer of ACE Market to the MAIN Market is pending approval from the Bursa Securities. As of now, i will still continue to hold until there is any updates on the transfer. SALUTE had also entered foreign currency forward contracts to manage exposure to the fluctuations in foreign currency exchange rates. For me, this is a preventive measurement taken by the management by looking at the long term.

SALUTE will be giving out 0.6 sen of dividend with the EX date on 15 March 2017 and payment date on 31 March 2017. By calculating its dividends, its DY is 1.48%.

2. Technical Analysis: 

SALUTE Daily Chart

SALUTE is in an uptrend form. After the SMA20 overtake the SMA40 and breaking its resistance at around 1.30, it had been going up. The volume also picked up after the CNY, while the volume had pushed SALUTE to all time high. However SALUTE is currently overbought, as we can monitor from the Bollinger Band and also the overbought indicator by RSI. 

3. Projection Analysis: 

Now, i will just try to annualize its target price.

Annualizing its EPS = (4.16 / 2 ) x 4 = 8.32 sen

Assuming its:

i) Current PE = 26, the Target Price is 2.16

ii) PE = 20, the Target Price is 1.66

iii) PE = 30, the Target Price is 2.50

And still remember that i keep on repeating the effect of ACE Market to MAIN Market? INARI increased around 300% from its proposed date to successful transferred date, while ELSOFT surged up around 100% from its proposed date to its successful transferred date. For SALUTE, it is first announced on 30 September 2016, the price gapped up on 4 October 2016. Let's assume the closing date on 4 October is 1.37, i will not assume SALUTE to go up 100% or 300%. For safety and comfort level, i will just assume 50%. The Target Price will be around 2.06.

My own personal target price for SALUTE will be ranging from 2.00 to 2.50. It might be different from your strategy. My strategy for SALUTE is for its growing revenue and net profit and also its transfer from ACE Market to MAIN Market. Since its Dividend Policy is 30%, if the DY increased, then, it will be inside my long term portfolio.

Summary: 

SALUTE is a growing company. By looking at their products range, i am quite firm that SALUTE will continue to grow:

- Revenue and net profit recorded double digit growth.
- Revenue increased 34% yoy and 24% qoq respectively, while net profit increased 27% yoy and 92% qoq respectively.

- Net cash company with RM97,132k and net cash per share of 0.25. 
- Dividend of 0.6 sen EX on 15 March 2016.
- Technical chart currently showing overbought signs, can consider to buy in at the middle band, ranging from 1.48 to 1.52 (if you want to).
- Currently pending the Bursa Securities approval on the proposed transfer from ACE Market to MAIN Market.
- INARI previously increased 300% while ELSOFT increased 100% from the day they announced the proposal to the successful transfer date. For SALUTE, for comfort level measurement, i target 50% and the TP will be around 2.00 to 2.50.

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Let's Ride the Wind and Gainvest

Gainvestor 10sai

20 February 2017

9.20pm

Sources:

[1]: http://gainvestor10sai.blogspot.my/2016/12/stand-up-and-salute.html
[2]: http://www.bursamalaysia.com/market/listed-companies/company-announcements/5340741