GAB- priced to 'perfection'

Result Update

For QE31/3/2013, GAB's net profit dropped 8% q-o-q but rose 19% y-o-y
to RM61 million while revenue increased 3% q-o-q or 21% y-o-y to RM443
million. The revenue increased q-o-q, mainly driven by Chinese New Year
sales and promotional activities. However, bottom-line was lower q-o-q
mainly due to higher costs invested in commercial activities to promote
sales for Chinese New Year.

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Table: GAB's last 8 quarterly results

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Chart 1: GAB's last 25 quarterly results

Valuation

GAB (at RM20.80 as at 4.30pm) is trading at a PE of 29 times (based on
last 4 quarters' EPS of 72.5 sen). At this multiple, GAB is deemed
overvalued. In a world where everyone is chasing yield, GAB's high PE
multiple can be overlooked as it pays a dividend yield of 3.6%. (Note:
Carlsbg (at RM15.64) has a dividend yield of 4.0%.)

Technical Outlook

GAB is in an irregular upward channel. It has in fact broken above that channel and its uptrend may even accelerate.

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Chart 2: GAB's daily chart as at May 15, 2013 (Source: quickcharts)

We can see that Carlsbg, which was in an expanding triangle, has also
broken above the triangle. This means that Carlsbg's uptrend can also
accelerate.

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Chart 3: Carlsbg's daily chart as at May 15, 2013 (Source: quickcharts)

Conclusion

Based on improving financial performance & positive technical
outlook, GAB is expected to continue to rise. As such, GAB is rated a
HOLD courtesy of unconventional monetary policies from the central
banks from America, Japan & Europe.

Note:
In
addition to the disclaimer in the preamble to my blog, I hereby confirm
that I do not have any relevant interest in, or any interest in
the acquisition or disposal of, GAB & Carlsbg.

Author : Alex Lu