HPI Resources Bhd ("HPI") is involved in the manufacture of corrugated carton & plastic packaging products. The corrugated carton packaging division contributes 90% of the group's turnover & all its profit, while the latter contributes the remaining of its topline but nothing to the bottomline.
Recent Financial Results
HPI's last 4 quarters results has been very good. During that period, its net profit jumped by more than 3 folds from RM2.4 mil to RM11.0 mil, while its turnover has increased by 22% from RM215 mil to RM263 mil.
Valuation
Based on the share price of RM0.865 at 12.00 noon today & its last 4 quarters' EPS of 25.8 sen, HPI is now trading at a PE of 3.4 times only. At this multiple, HPI is considered cheap.
Technical Outlook
HPI share price moves in a very erratic fashion. In May 2005, HPI plunged from RM1.50 to RM0.80. Thereafter, the share price drifted to a low of RM0.45 in February 2006. Since then, it has been going up gradually. To rise farther, HPI must overcome its medium-term downtrend line, currently at RM0.80. It has done so yesterday when it crossed this resistance & closed at RM0.82. However, this breakout is not supported by good volume.
Chart: HPI's weekly chart as at Jan 18
Conclusion
Based on attractive valuation & possible breakout, I would recommend investing in HPI for the medium-term.
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