Revenue Growth Bolsters The LAB’s Q1 Net Profit
- Strong revenue growth continues to bolster The LAB’s bottom-line resulting in a 37.0% (or $18.11Mn) increase in net profit for the 3 months ended January 31, 2021, to $67.02Mn (EPS: $0.07) relative to the same period in the 2019/20 financial year.
- The company has remained resilient in spite of the challenges of the pandemic and benefited from a rise in its core business. Media placement which was up $21.3Mn (or 16.6%), and production which increased by $72.8Mn (or 92.3%), contributed to a 35.5% (or $93.27Mn) expansion in revenues, which translated into the higher earnings after tax.
- The overall effect of robust revenue growth was tempered by a 39.6% (or $68.37Mn) and 29.4% (or $11.97Mn) increase in direct and admin expenses, respectively. Higher staff costs, on account of increased work volume, repairs and maintenance of production equipment, and depreciation and amortization costs were behind the rise in admin expenses. Notably, even with this increase, administrative expenses as a percentage of revenue inched down to 14.9% from15.6% in the same period last year.
- The LAB should continue to benefit from the gradual recovery in domestic economy and the measures being implemented by the government to improve business creation as well as MSME expansion and competitiveness, which could stimulate increased demand for its services.
- After increasing by 1.7% to $3.06 during 2020, the company’s stock price has fallen by 5.9% since the start of 2021, closing Thursday’s trading session at $2.88. At this price, the LAB currently trades at a P/E of 16.6x earnings, which is below the Junior Market Average of 24.8x.
(Source: The Lab Financial Statements & NCBCM Research)