PCCS Group Berhad (6068)
Principal Acitivity
Engaged primarily in the manufacture and marketing of apparels. It offers a range of adult and children apparels, including jackets, tracksuits, blouses, polo-shirts, and winter clothing.
Shareholding
Good Balance Sheet
PCCS's borrowings has been reducing for the past 3 years. Its net operating cash and current ratio has also improved.
Revenue
The Group’s revenue decreased by 17.11% mainly due to the significant decrease in orders received by the Group’s manufacturing plants in the PRC(People's Republic of China).
Pre-tax Profit
However, its pretax profit has increased by 161.86% which mainly due to increase in other income by RM7M (mainly from gain on disposal of NCA and unrealised FOREX), reduce in admin expense and selling and marketing expenses. Besides, improvement of net profit isdue to the improvement in sales orders and cost management strategy in Cambodia Apparel Segment as
well as Printing and Embroidering Segment.
Net Operating Cash
The increase in net operating cash is mainly due to decrease in payment to trade and other payable by RM20M. After deduct the trade and other payable, the net operating cash is worsen a lot compare with previous year.
Revenue Segmentation
Geographical segment:
1. Malaysia 13.56%
2. Cambodia 17.52%
3. China 38.7%
4. Hong Kong 30.22%
Business Type:
Brands:
1. Cross Creek (Classic golf apparel)
2. Urban Ultimate ( design garments specifically for women who are self-confident and knowing how to enjoy life)
3. Attack II (Avant-garde trend, high quality, unique features and rare collections）
4. Ropa (“Fashion and quality at the best price”.)
Target customer seems like targeted to high end customer.
Comment
Although Cambodia's business has contributed on improvement of profit. However, it just contribute 17.52% to the revenue. China, which is PCCS largest market, its revenue has decreased and it it don't seems it will recover so soon according to management's prospect.
Highly dependent on foreign market, profit/loss will be affected by foreign currency. Depreciation of Ringgit will benefit PCCS.
Commentary on Prospects (Quarterly Report for 30 June 2019)
The Board has no confident on PCCS's profit generating for the next year. PCCS's revenue will be affected due to global trade extension and reduce of sales in China and Cambodia, which constitutes to 56% of its revenue.
Recent Announcement
1. From Apr'19 to Aug'19, the directors keep disposing shares and warrants.
2. Change of external auditor from EY to Baker Tilly.
Technical Analysis
Its 200 MA is moving upward and the share price is remain above 200MA. In the long term, it is considered uptrend. However, in medium term, its 65 MA is moving downward. In technical perspective, it is not wise to enter the stock in the short term. Investor should wait for the turning point of medium term MA.
Summary
1. Low P/E (below 5)
2. Good balance sheet (decreasing in borrowing and increasing of net operating cash)
3. Due to China and Malaysia unfavourable market, the profit is unlikely to grow in the future 1-2 year.
4. From Apr'19 to Aug'19, the directors keep disposing shares and warrants.
5. Increase in pre-tax proft is mainly due to one off income (Gain from disposal of NCA, Gain on FOREX)
Recommendation
Undervalued company with uptrend, but growth is unlikely in the future 1-2 years. Hence it is advised to place it in watchlist, monitor its quarterly report to observe the sign of recovery.
Engaged primarily in the manufacture and marketing of apparels. It offers a range of adult and children apparels, including jackets, tracksuits, blouses, polo-shirts, and winter clothing.
Shareholding
PCCS's approximate 56% of shares are owned by directors owned company. This is a good sign as directors will show more commitment to the company. Surprisingly, the third largest shareholder is one of the famous investor in Malaysia, Koon Yew Yin.
Financial Statement Analysis
Good Balance Sheet
PCCS's borrowings has been reducing for the past 3 years. Its net operating cash and current ratio has also improved.
Revenue
The Group’s revenue decreased by 17.11% mainly due to the significant decrease in orders received by the Group’s manufacturing plants in the PRC(People's Republic of China).
Pre-tax Profit
However, its pretax profit has increased by 161.86% which mainly due to increase in other income by RM7M (mainly from gain on disposal of NCA and unrealised FOREX), reduce in admin expense and selling and marketing expenses. Besides, improvement of net profit isdue to the improvement in sales orders and cost management strategy in Cambodia Apparel Segment as
well as Printing and Embroidering Segment.
Net Operating Cash
The increase in net operating cash is mainly due to decrease in payment to trade and other payable by RM20M. After deduct the trade and other payable, the net operating cash is worsen a lot compare with previous year.
Revenue Segmentation
Geographical segment:
1. Malaysia 13.56%
2. Cambodia 17.52%
3. China 38.7%
4. Hong Kong 30.22%
Business Type:
Brands:
1. Cross Creek (Classic golf apparel)
2. Urban Ultimate ( design garments specifically for women who are self-confident and knowing how to enjoy life)
3. Attack II (Avant-garde trend, high quality, unique features and rare collections）
4. Ropa (“Fashion and quality at the best price”.)
Target customer seems like targeted to high end customer.
Comment
Although Cambodia's business has contributed on improvement of profit. However, it just contribute 17.52% to the revenue. China, which is PCCS largest market, its revenue has decreased and it it don't seems it will recover so soon according to management's prospect.
Highly dependent on foreign market, profit/loss will be affected by foreign currency. Depreciation of Ringgit will benefit PCCS.
Commentary on Prospects (Quarterly Report for 30 June 2019)
The Board has no confident on PCCS's profit generating for the next year. PCCS's revenue will be affected due to global trade extension and reduce of sales in China and Cambodia, which constitutes to 56% of its revenue.
Recent Announcement
1. From Apr'19 to Aug'19, the directors keep disposing shares and warrants.
2. Change of external auditor from EY to Baker Tilly.
Technical Analysis
Its 200 MA is moving upward and the share price is remain above 200MA. In the long term, it is considered uptrend. However, in medium term, its 65 MA is moving downward. In technical perspective, it is not wise to enter the stock in the short term. Investor should wait for the turning point of medium term MA.
Summary
1. Low P/E (below 5)
2. Good balance sheet (decreasing in borrowing and increasing of net operating cash)
3. Due to China and Malaysia unfavourable market, the profit is unlikely to grow in the future 1-2 year.
4. From Apr'19 to Aug'19, the directors keep disposing shares and warrants.
5. Increase in pre-tax proft is mainly due to one off income (Gain from disposal of NCA, Gain on FOREX)
Recommendation
Undervalued company with uptrend, but growth is unlikely in the future 1-2 years. Hence it is advised to place it in watchlist, monitor its quarterly report to observe the sign of recovery.
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