The 1st quarter results has not been encouraging. The revenue suffered a 13.2% and 15.7% drop in the revenue from Q1 2014 and Q4 2014 respectively. Consequently, the net profit attributable to shareholders tanked to about 55% and 52.9% from the said quarters.
But then, what is in for the shareholders going forward? The gross and net profit of about 73-74%% and between 10-15% respectively appeared quite consistent. To increase profit mean simply to increase the topline, ie. to increase the sales. The operating cost components are fairly consistent between $90m and $95m.
Assuming a $25m drop in the revenue in Q2 2015 and stay constant there for the next two quarters going forward earnings per share to about 1.62 cents. That should translate to about 6.61 cents for the year. That gives a PE of about 25 based on current price. But this will likely to trigger another round of fall in the share price to about $1.30 and $1.35 (conservatively) as the growth engine has stalled bringing a PE of about 20.
Assuming that the revenue managed to increase to about $170m, and stay consistently there should put the share price back to about $2 or just below it.
The answer lies with the sales team.
(Brennen Pak has been a stock investor for more than 25 years. He is the Principal Trainer of BP Wealth Learning Centre LLP. He is the author of the book “Building Wealth Together Through Stocks.”) – The ebook version may be purchased via www.investingnote.com.