Case Study:

Deleum Bhd
(September 13, 2017)

Step #1:
What does it do?

Deleum Bhd has 3 business divisions..

1. The Power & Machinery Division consists of sale of gas turbines,

supply, and commission of combined heat and power plants, supply
of valves, repair and maintenance of motors, generators,
transformers, and pumps.

2. The Oilfield Services Division derives income from provision of

slickline equipment and services, oilfield chemicals, integrated
wellhead maintenance services and drilling equipment.

3. The Integrated Corrosion Division derives income from provision of

integrated corrosion and inspection services.

Step #2:
Check Financial Results

Figures in RM 000
Year 2012 2013 2014 2015 2016

Sales 473,240 484,684 657,273 649,398 608,652

Earnings 44,450 49,559 59,324 45,408 26,595

Dividends 16,500 24,000 26,500 27,959 19,074

ROE 20.6% 20.5% 21.6% 15.5% 8.8%

DPR 37.1% 48.4% 44.7% 61.6% 71.9%

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Observations:

1. Deleum Bhd has reported growth in sales, profits and dividend

payouts from 2010 to 2014. Since 2015, Deleum Bhd has recorded
back-to-back decline in sales, profits and dividend payouts.

2. As such, it is not meaningful to calculate P/E Ratio, ROI & Dividend

Yields from Deleum Bhd as they are best used for stocks that grow
profits consistently.

Step #3:
Check Future Prospects

Order Book:
As at 30 April 2017, Deleum Bhd has total order book of RM 1.95 Billion.
Here is the list of the contracts:

No. Contracts Expiry Year

1 Provision of Painting & Alternative Blasting 2017

2 Thermo-Chemical Solid Depository Treatment Technology 2018

3 Provision of Integrated Wellhead Maintenance Services 2018

4 Supply of PDC & Rock Bits 2018

5 Supply of Services for Casing Centralizer Equipment 2019

6 Provision of Slickline Equipment & Services 2019

7 Provision of Well Control Services 2020

8 Long-Term Service Agreement for Gas Turbine 2023

9 Supply of Gas Turbine Packages 2023

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Risks:
Deleum Bhd has revealed that its key operating risk is the risk of not
generating sufficient income against a challenging operating environment
following the slump in crude oil prices. As such, Deleum Bhd continues to
implement cost effective processes to optimizing cost efficiencies and
working capital and as well as conserving its cash reserves. As 30 June 2017,
Deleum Bhd has reported to have RM 139.10 Million in cash reserves,
current ratio of 1.77 and debt-to-equity ratio of 21.8%.

Step #4:
Check Quarterly Results

Figures in RM 000
Period 2016 Q3 2016 Q4 2017 Q1 2017 Q2

Sales 139,247 201,289 89,963 106,461

Earnings 3,346 9,879 1,317 6,700

EPS (Sen) 0.84 2.47 0.33 1.67

Observations:

1. Deleum Bhd has reported to make RM 536.96 Million in revenues

over the last 12 months.

2. It has made RM 21.24 Million in shareholders earnings or 5.31 sen in

earnings per share (EPS) during the period.

As I write (13 September 2017), Deleum Bhd is trading at RM 0.83 a share. Is

this a good time to buy / hold / sell shares of Deleum Bhd?

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Step #5:
P/B Ratio

As at 30 June 2017, Deleum Bhd has reported to have RM 0.752 in net assets
a share. At current price of RM 0.83, Deleum Bhds current P/B Ratio works
out to be 1.10.

Year 2013 2014 2015 2016 13/9/17

P/B 2.73 2.30 1.50 1.33 1.10

Step #6:
Check SMA-Crossover Method

Screenshot of Bursamarketplace.com

Blue Line = Actual Stock Price

Black Line = SMA-40 Line (Tracks Short-Term Price Trend)
Green Line = SMA-100 Line (Tracks Long-Term Price Trend)

Observations:

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 1. At Point A, there is a crossover. The Black Line has moved above the
Green Line. All 3 lines: the Black, Green and Blue lines have moved
upwards. Thus, Deleum Bhd has moved on an uptrend since Point A.

2. At Point B, there is another crossover. The Black Line has moved

below the Green Line. All 3 lines: the Black, Green and Blue lines
have moved downwards. Thus, Deleum Bhd has moved on a
downtrend since Point B.

Snapshot:
As at 13 September 2017, we have the following:

Step Criteria Results

Past Sales, Profits, Dividends

Decline since 2015
1
Present Profits Decline

Future Total Order Book = RM 1.95 Billion

P/E Ratio 15.44

P/B Ratio 1.10 (The Lowest)

2
Gross Dividend Yields Not meaningful

SMA-Crossover Method Downtrend

Regards
Ian Tai
Creator of Bursaking.com.my

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Disclaimer:
The strategies outlined in this article / report / written material is intended
for education & illustration purposes. It is strictly not intended to be an
investment advice & must not be relied upon as personal financial advice. If
you need specific investment advices, please consult the relevant
professional investment advices.

No warranty is made with respect to the accuracy, adequacy, reliability,

suitability, applicability, or completeness of the information contained.

The author disclaims any reward or responsibility for any gains or losses
arising from direct and indirect use & application of any contents of the
article / report / written material.

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