Wednesday, March 10, 2021

TOPGLOV: Fantastic Earnings For Now? (UPDATED)

Result Update

For QE28/2/2021, Topglov's net profit rose 20.8% q-o-q or 24-fold y-o-y to RM2.869 billion while revenue rose 12.7% q-o-q or 336% y-o-y to RM5.365 billion. The Group’s strong and healthy Sales figures were attributed to the continued demand for gloves globally while the improved Profit came on the back of higher sales output, high utilisation levels which amplified production efficiency, coupled with higher average selling prices (ASPs) in line with market pricing. The Group’s healthy profit was also attributed to ongoing enhancements across its operations, through digital transformation, continuous R&D and innovation, quality and productivity initiatives and talent acquisition and development.

 
Table 1: Topglov's last 8 quarterly results


Graph: Topglov's last 74 quarterly results

Financial Position

As at 28/2/2021, Topglov's financial position is deemed healthy with current ratio at 1.9 times and Total liabilities to Total equity at 0.51 time.

Valuation

Topglov (closed at RM5.19 yesterday) is now trading at a trailing PE of 6 times (based on last 4 quarters' EPS of 85.89 sen). This exceptionally low PE ratio reflects investors' perception that Topglov's future earnings must decline in the near term due to average selling prices & profit margins normalization. This is not unreasonable given the glove demand has been driven by the Covid-19 pandemic, which is expected to be brought under control with the arrival of vaccines worldwide.

My previous 2 earnings reports on Topglov prior to the pandemic were in June 2019 (here) and October 2018 (here). In these reports, Topglov was trading at a PE of 31-32 times. Assuming that Topglov's fair PE is 32 times, the only way that Topglov's current share price can be justified is for its quarterly earnings to drop by a whopping 81% from RM2.869 billion to RM545 million! Is that too extreme?! 

To get a better feel of how much Topglov's net profit has risen, let's compare the financial performance in the last 4 quarters against the performance in the preceding 4 quarters. Ssee Table 2 below. 

Table 2: Topglov's latest 4 quarterly results compared to the previous 4 quarterly results

The first thing that would jump up is the staggering 18-fold increase in net profit from RM382 million to RM6.885 billion! This was achieved on the back of a 210%-increase in revenue from RM4.819 billion to RM14.922 billion. From the foregoing, I would highlight 2 points:

(a) Topglov's net profit margin has shot up from a mere 7.9% to 46.1%.  

(b) As a result, quarterly net profit rose from an average of RM95 million to RM1.721 billion. 

With the pandemic being brought under control, it is likely that the abnormally high net profit margin will decline over the next few quarters. I have computed 4 scenarios of lower net profit margin. See Table 3 below.

Table 3: Topglov's 4 possible scenarios of net profit margin & valuation estimate

If we accept that Topglov would eventually trade at its past PE of 31-32 times, then the market is now projecting its 4-quarter net profit would go down to RM1.344 billion in next few quarters. That means its quarterly net profit would be about RM336 million. 

Nothing is a sure thing in investing. If the above computation and assumptions are too pessimistic and proven wrong later, then the market will revise its outlook and the share price will go up, or vice versa. For now, this is what's the market is telling us.

Technical Outlook

Topglov has peaked at RM9.76 in early August, and then went into a gradual decline. If you plot a semi-log chart, it is possible to draw an uptrend line, SS with support at RM4.60.


Chart 1: Topglov's semi-log daily chart as at Mar 9, 2021 (Source: Malaysiastock.biz)

Conclusion

Based on the current strong financial performance, healthy financial position and fairly attractive valuation, Topglov makes a very appealing case as a value stock for long-term investment. However the arrival of vaccines and their positive impact in controlling the spread of the pandemic have changed the narrative of investing in pandemic stocks. Is Topglov a value stock or a value trap? Only time will tell. 

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Sunday, February 28, 2021

LATITUD: Earnings Growth Continued (UPDATED)

Result Update

In QE301/12/2020, Latitud's net profit rose 103% q-o-q or 269% y-o-y to RM26.6 million while revenue rose 4% q-o-q or 17% y-o-y to RM244 million. The Group revenue rose q-o-q mainly attributable to higher sales recorded by furniture plants due to higher shipment in current quarter and higher local sales recorded by panel board lamination plant, which were offset by weakening of US Dollar (“USD”) against Ringgit Malaysia (“RM”) by 1.2%.

The Group has recorded a 80%-increase in PBT from RM16.8 million to RM30.3 million mainly attributable to the increase in gross profit; lower foreign exchange loss of RM1.1 million recorded in current quarter compared to preceding quarter; and final insurance compensation of RM7.8 million received by a furniture plant in Vietnam in current quarter for a fire incident occurred in FY2018.

The Group has recorded 26%-increase in gross profit from RM30.3 to RM38.1 million mainly attributable to the increase in revenue and higher sales of better margin products.


Table: Latitud's 8 quarterly results


Graph: Latitud's P&L  for last 62 quarterly results

Financial Position

As at 31/12/2020, Latitud's financial position is deemed healthy with current ratio at 2.2x and gearing ratio at 0.5x.

Valuation

Latitud (closed at RM4.19 last Friday) is now trading at a trailing PER of 9.4 times (based on last 4 quarters' EPS of 44.7 sen). If we exclude the one-off exceptional gain from insurance claim of RM7.8 million received by a furniture plant in Vietnam, the PE ratio is still quite attractive at 11.4 times.

Proposed Bonus Issue

Latitud has proposed a 1-for-1 bonus issue in January (here). The ex date for the bonus issue has just been fixed on 12 February (here). This will likely attract retail buying interest which will boost the share price in the near term.

Technical Outlook

Latitud is in an uptrend line with support at RM3.90. Immediate resistance is at the horizontal line at RM4.50.

Chart 1: Latitud's daily chart as at Feb 25, 2021 (Source: Malaysiastock.biz)

Looking at the monthly chart, we can see that Latitud has broken above the long term downtrend line at RM2.50 in October 2020.


Chart: Latitud's monthly chart as at Feb 25, 2021 (Source: Malaysiastock.biz)

Conclusion

Based on good financial performance & position, fairly attractive valuation and bullish technical outlook, Latitud is a good stock for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Thursday, February 25, 2021

EFORCE: Revenue & Earnings Continued to Grow

Result Update

For QE31/12/2020, EForce's net profit rose 48% q-o-q or 142% y-o-y to RM3.9 million while revenue rose 3% q-o-q or 59% y-o-y to RM9.2 million. Revenue grew steadily due to "continuing interest of retail investors in Bursa securities sustained the overall high daily trading volume in quarter 4. Hence the sustained growth in our increase in Application Services Providers (“ASP”) revenue. However, our Application Solution (AS) segment performance was flat to last year. System enhancement project implementations resumed earnestly in this quarter, and billings for work done expected next year."


Table: EForce's last 8 quarterly results


Graph: EForce's last 48 quarterly results  

Financial Position

As at 31/12/2020, EForce's financial position is deemed very healthy with current ratio at 5.7 times. The company has cash balance of RM22.9 million (or equivalent to 3.7 sen per share). It has no borrowing. 

Valuation

EForce (closed at RM0.46 yesterday) is now trading at a PE of 24 times (based on last 4 quarters' EPS of 1.90 sen). Based on this PE ratio, EForce is deemed fairly valued.

Technical outlook

EForce is trading not far from the line connecting the last 5 years' lows (excluding the Mar 2020 extreme low) at RM0.40-0.42. If we drew a line connecting all the lows (including the Mar 2020 extreme low), that baseline will act as support at RM0.25. At this moment, there is no sign that EForce share price is poised for an upside move.

 
Chart: EForce's monthly chart as at Feb 24, 2021 (Source: Malaysiastock.biz)

Conclusion 

Based on improved financial performance, good financial position & reasonable valuation, EForce is a good stock for long term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

BOXPAK: Decent Earnings Continued

Result Update

For QE31/12/2020, Boxpak's net profit dropped 7% q-o-q but rose 101% y-o-y to RM5.9 million while revenue rose 8% q-o-q or 10% y-o-y to RM187 million.

The group revenue increased q-o-q mainly contributed by increase in sales volume in Malaysia, Vietnam and Myanmar operations. As a result of improvement in revenue, the Group's gross profit improved q-o-q from RM21.7 million to RM23.0 million. Consequently, the Group recorded a profit before taxation of RM7.3 million in QE31/12/2020.


Table 1: Boxpak's last 8 quarterly results

Looking at the full year segmental reporting, you can see clearly that Boxpak's earnings turnaround was due to lower operating expenses. 


Table 2: Boxpak's full year segmental performance for FY2020 and FY2019


Graph: Boxpak's last 53 quarterly results

Financial Position

Due to its rapid growth, Boxpak's financial position is a bit stretched. Liquidity is tight with current ratio at 0.94 time as at 31/12/2020 while gearing is elevated with total liabilities to total equity at 1.6 times.

Valuation

Boxpak (closed at RM1.50 yesterday) is now trading at a PE of 15 times (based on last 4 quarters' EPS of 9.95 sen). While the PE ratio is fair, this ratio can improve as the earnings of the company continue to improve. 

Technical Outlook

Boxpak has started on its uptrend. While the uptrend is not strong, it is likely to pick up pace once the MACD cross into the positive territory.


Chart 1: Boxpak's monthly chart as at Feb 24, 2020 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance and positive technical outlook, Boxpak is a good stock for long term investment.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Wednesday, February 17, 2021

Banking Stocks: Bullish Breakout Achieved

The Financial Services index has broken above its intermediate downtrend line, RR at 14700. This may lead to an uptrend in Financial Services index in the near term.

Chart 1: Financial Services index's daily chart as at Feb 16, 2021 (Source: Malaysiastock.biz)

Two banking stocks that may likely join in an uptrend in Financial Services index are Maybank and CIMB. Both of these stocks have also broken above their respective downtrend lines.

Chart 2: Maybank's daily chart as at Feb 16, 2021 (Source: Kenanga's BTX chart)

Chart 3: CIMB's daily chart as at Feb 16, 2021 (Source: Kenanga's BTX chart)

 

Tuesday, February 16, 2021

ARBB: A Promising Small Cap Stock

Background

ARB Berhad ("ARBB") is involved in the manufacture and sales of wood products primarily in Malaysia. It also engages in the provision of scows and tug boats hiring services; consulting services for project management; management services; and timber contracting activities. In addition, the company is involved in reselling customized enterprise resource planning software system and information technology related services.

Results Update

In QE31/12/2020, ARBB's net profit rose 135% q-o-q or 54% y-o-y to RM19.7 million while revenue rose 24% q-o-q or 61% y-o-y to RM72.5 million. The increase in revenue is contributed by Enterprise Resource Planning (ERP) and Internet of Things (IoT) segments. ERP segment is involved in designing and reselling of customised ERP solutions, whereas IoT segment involves in integrated solutions in system (IoT SEPCM). 

Table: ARBB's last 8 quarters' P&L

Graph: ARBB's last 58 quarters' of P&L

Financial Position

As at 31/12/2020, ARBB's financial position is deemed satisfactory with current ratio at 6.3 times while Total Liabilities to Total Equity stood at 0.4 times.

Valuation

ARBB (at yesterday's closing price of RM0.335) is now trading at a PE of 3.1 times (based on last 4 quarters' EPS of 10.87 sen). At this PE, ARBB is deemed fairly attractively.

Technical Analysis

ARBB is poised to break above its downtrend line, RR at RM0.33-0.34.

Chart 1: ARBB's daily chart as at Feb 15, 2021 (Source: Malaysiastock.biz)

Chart 2: ARBB's weekly chart as at Feb 15, 2021 (Source: Malaysiastock.biz)

Conclusion

Based on good financial performance & position and attractive valuation, ARBB can be a good stock for medium-term investment. Its potential share price performance will depend on the ability of its share price to go above the immediate downtrend line at RM0.33-0.34. 

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Thursday, February 11, 2021

Happy Chinese New Year

 I like to wish all my Chinese readers a very happy new year. , Gong Xi Fa Cai.

Source: Freepik
  

Thursday, February 04, 2021

LPI: Trading at Attractive Valuation

Result Update

For QE31/12/2020, LPI's net profit rose by 10.5% q-o-q or 10.0% y-o-y to RM95 million while revenue rose 6.7% q-o-q or 5.8% y-o-y to RM422 million. Profit before tax grew by 6.9% y-o-y to RM123.3 million from RM115.3 million in the corresponding quarter in 2019. The growth in PBT was contributed by profit from the general insurance segment, which increased by 7.9% to RM124.5 million from RM115.4 million, as well underwriting profit, which grew by 16.3% to RM112.7 million from RM96.9 million previously mainly contributed by the lower net claims incurred and the growth in net earned premium as compared to corresponding quarter in 2019. The investment holding segment recorded higher loss before tax of RM1.2 million as compared to RM0.1 million in the corresponding quarter in 2019 mainly due to lower interest income received and higher management expenses during the current quarter.

 
Table: LPIs last 8 quarterly results


Graph: LPI's last 56 quarterly results

Valuation

LPI (closed at RM13.46 yesterday) is now trading at a trailing PE of 15.9 times (based on last 4 quarters' EPS of 84.52 sen). LPI paid out dividend totaling 72 sen during the period. This means LPI has a decent DY of 5.3%. Based on these 2 valuation models, LPI is deemed fairly attractive.

Technical Outlook

From Chart 1, we can see LPI has been moving in a saucer formation around RM13.00-14.00 in the past 7 months. From Chart 2, we can see that the monthly MACD is poised to hook up. When that happens, the technical outlook will turn positive for the stock.


Chart 1: LPI's daily chart as at Feb 3, 2021 (Source: Malaysiastock.biz)


Chart 2: LPI's monthly chart as at Feb 3, 2021 (Source: Malaysiastock.biz)

 Conclusion

Based on good financial performance, fair valuation & mildly positive technical outlook, LPI is still a good stock for long-term investment. 

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.