Defensive Strategies in Oil & Gas: Recurring Revenue and Diverse Revenue Streams

An In-Depth Analysis of the Latest Financial Performance and Future Prospects

In 'The Latticework of Mental Models' by Munger, Bayesian methods are explored for updating conclusions with new, objective data. This process involves integrating initial conclusions with recent data, leading to more profound insights. By embracing new information, including insights from failures, existing beliefs are enhanced. This approach acts as a catalyst, refining future forecasts and boosting success rates in the stock market. As a result, reviewing quarterly reports is essential, as it more closely aligns with the likelihood of making accurate predictions. Since fundamental changes in businesses unfold over time, continuous and detailed analysis is key. In the current analysis, attention is turned to the latest quarterly financial statements. Leveraging these insights, the CAN SLIM investment strategy will be employed to scrutinize the relatively unnoticed stock of Bursa Malaysia T7 global, which was covered before. 

C - Current Quarterly Earnings

Using the CAN SLIM® investment analysis framework, we begin with 'C', which stands for Current Quarterly Earnings. This requires a minimum 25% year-over-year increase in Earnings Per Share (EPS), preferably with accelerating growth. T7 Global has successfully achieved this target.

For the quarter under review, T7 Global’s revenue and profit after tax and minority interest (PATAMI) marked significant improvements, increasing by 71.1% and 125.4% year on year, to RM137.4 million and RM8.0 million, respectively. Over the cumulative 9-month period, the Group reported a 71.8% surge in revenue to RM335.4 million and a 110.1% increase in PATAMI to RM18.7 million.

The company demonstrated very impressive cost control, contributing to better gross and profit margins. Compared to the preceding year, current year-to-date revenue is up 72% to RM335 million, but the cost of sales increased only by 57% to RM150 million. This contributed to a 122% growth in gross profit to RM45 million and a 148% growth in profit before taxation to RM12.87 million.

Engineered Packages Division:

In the current quarter, the Group registered revenue of RM63.98 million, compared to RM47.54 million in the preceding quarter ending 30 June 2023, an increase of approximately 34.58%. For the period ending 30 September 2023, the engineered packages division, which mainly consists of gas generation packages and offshore equipment packages, reported revenue of approximately RM155.77 million. This is an increase of approximately 29.19% compared to RM120.57 million in the preceding year’s period.

Products & Services Division:

The products and services division registered revenue of RM73.37 million in the current quarter, compared to RM56.50 million in the preceding quarter ending 30 June 2023, an increase of approximately 29.86%. In the current period, this division reported revenue of approximately RM179.66 million, compared to RM74.67 million in the preceding year’s period, an increase of approximately 140.61%.