The potential delisting of Perisai next month shows the risk of investing in a PN17 company. For RGT Berhad (previously known as Asia Knight) the reason for the company to fall into PN17 is not the same as Perisai. It did not fall into PN17 due to shareholders funds falling below 25% of paid up capital but because of its auditors has express disclaimer opinions on the company’s audited account of FY2014. For me this is worse than Perisai since investors cannot be sure if the numbers reported by the company are actually true or not.
That being said, the company was fast with coming up with a regulation plan of which was successfully implemented last year. The regulation plan for this company evolve around Asia Knight acquiring a 60% interest in Rapid Growth Technology (hence why the name change) for RM48mil which was funded via last year’s right issue exercise. With this acquisition it is expected that RGT would most probably be lifted from the PN17 status in FY19. Hopefully this time, the auditors would not find any major concerns on the accounting treatment of the company’s books.
Based on the 2 most recent quarterly report (1Q19 & 4Q18) the company now can achieve a profit to shareholder ranging around RM1-1.2mil per quarter. Assuming they can manage to deliver a profit of RM6mil to shareholder (average profit for 1, 2 & 3Q19 needs to be RM1.6m), at the current price the company is already valued at 17.3x PE. If you include the warrants (since it is already in the money), that would mean that the valuation would actually go up to more than 20x PE which is high considering the current market environment.
The company’s current balance sheet looks healthy with the company currently having a net cash position of RM20.6mil. The company has an NTA of RM40mil or 7 sens per share. At the current share price, the company is currently trading at a PB valuation of 2.6x.
If you are looking to diversify your portfolio outside of RGT (due to its rich valuation) I would recommend you to look at MBMR.
MBMR is a direct proxy to Perodua via its 22.6% interest in the company. Valuation is cheap at only 6.5x PE (based on target FY18 PATAMI of RM145mil. 9m PATAMI is already RM106mil). PB is low at only 0.6x BV. 4Q18 results is expected to be higher than 3Q18 and last year's 4Q17.
For FY19 growth will be driven by the still high demand of new Myvi and the newly launched SUV and also the new Alza in 2H19.
Please go through the analyst reports (https://klse.i3investor.com/servlets/stk/pt/5983.jsp) and do your own analysis before making any decisions. Most analysts have a TP of above RM3 for the company with Hong Leong being the lowest at RM3.13 and Maybank the highest at RM4.50.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Gorengkaki2016
60 posts
Posted by Gorengkaki2016 > 2018-11-01 14:33 | Report Abuse
PN17 gone soon