TECHNICAL AND FUNDAMENTAL ANALYSIS

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PHARMA (7081) - Technical & Fundamental Analysis

February 26, 2019

Technical Analysis

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- PHARMA hit highest shares price RM6.490 on April 23, 2015. Ironically, it dropped by 63% and reached RM2.530 on Feb 26,2016.

- After PHARMA announced further reduction of net profit with 80% (YoY) on 21.2.2019, significant selling pressure with high volume which further pushed PHARMA share price to lowest and hit RM2.610 (Closing price on 22.2.2019)

- There is no sign of recovery in shares price movement.

- PHARMA completed symmetric triangle and breakdown resistance (bottom triangle) with huge volume. With the symmetric triangle measurement, PHARMA shares price will try to challenge +/-RM2.355.

- RSI : Oversold

- MACD: Bearish

- Resistance line(1): RM2.610

- Support line(1): RM2.355

- Support line(2): RM2.150 

 

Fundamental Analysis

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Market Prospect Ratio

- PHARMA EPS reduce from 20.74 cents (Y2017) to 16.35 cents (Y2018)

- EPS YoY reduced by 21.2%

- However, PHARMA is good dividend payout shares due to payout ratio maintains above 90% in the past 3 years but depreciation of shares price is much more higher than dividend payout.

Profitability Ratio

- Gross Margin Ratio & Profit Margin Ratio

a) Although net sale increases steadily in the past 5 years but PHARMA unable to maintain lower COGS which lead gross profit downward.

b) Besides, PHARMA interest expense increase more than double from RM13.4M (Y2013) to RM28.0M (Y2017) which reflect PHARMA need intensive financing to run their operation. Thus, short-term loan increased by 122% since Y2013

- Return on asset & Return on capital & Return on Equity

a) Net income reduced by 36% since Y2015 and Intangible assets increased by 193%. Thus, ROA/ROE/ROC don't reflect PHARMA capability of income generation.

Efficiency Ratio

- There is a stable efficiency ratio in company performance.

- The figures indicated PHARM don't have serious problems in sales collection and "CCC"

Liquidity Ratio

- Current liabilities increased by 68% since Y2013 and it is major contributed by Short-Term loan and Creditors/Payable.

- With low net income/net cash, how a company able to sustain high dividend payout ratio? (Average payout ratio above 90% in past 3 years)

- Dividend Payout via short term loan financing or patent income or operation income?

- If we are dividend investor, we need to think twice from this perspective.

Solvency Ratio

- PHARMA still able to meet short-term obligation in overall perspective.

- PHARMA are putting a lot of resource in investing activities via financing method. It is good indicator for future income generation.

 

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