Stocks With Momentum: Privasia Technology

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Privasia Technology Bhd
PRIVASIA is an information technology player specialising in consultancy, systems integration services, IT outsourcing, E-bidding and E-procurement for the port and logistics industry. The company also provides wireless and satellite-based communication solutions business.

Over the last five years, Privasia has seen its revenue double from RM27.2 million to RM58.5 million, while net profit rose from RM1 million to RM5.4 million. In 2013, revenue dropped by 3.6% to RM58.5 million but net profit increased by 8.5% to RM5.4 million. For 1H2014, revenue declined 6.6% to RM27.5 million while net profit fell 28.9% to RM2.3 million, due to slower billings and higher operating costs.

Interestingly, Privasia has a total order book of RM130.9 million in mid-2014, which is higher than the combined revenue for 2012 and 2013.

Privasia has a very modestly geared balance sheet. Its gearing ratio started to improve since 2011 to 9.8% in 2013. Borrowings were reduced to RM15.7 million in 2013 from RM24.1 million a year ago. The company paid out a 0.3 sen dividend per share in 2013 which translates into a yield of 1.7%.

Valuations for the stock are higher than the broader market, but relatively lower compared to other technology stocks, especially those that are actively involved in GST software and have received a recent price and earnings boost ahead of its April 2015 implementation.

Privasia is currently trading at 1.3 times book, with a trailing 12-month P/E ratio of 20.8 times. By comparison, technology stocks such as IFCA MSC Bhd is trading at 6.5 times book and a trailing 12-month P/E ratio of 32.5 times while Censof Holdings Bhd is trading at 2.53 times book and trailing 12-month P/E ratio of 332.6 times.

Edge Research rates this company a 1.4 out of 3 on fundamentals and 0.6 out of 3 in terms of valuation attractiveness.

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This article first appeared in The Edge Financial Daily, on November 25, 2014.