London Biscuit Bhd ("Lonbisc") is involved in the manufacture & sale of confectionery and other related foodstuffs.
Recent & On-going Corporate development
Lonbisc has recent acquired a 20%-stake in Lay Hong Bhd, a listed company involved in poultry farming for RM9.85 mil. Lonbisc explained that the reason for the acquisition is to gain control and ownership of a major supplier to ensure adequate, regular and continuous supply of liquid eggs at "controlled prices" to meet its ongoing expansion plans.
Recent Financial Results
Lonbisc's last 4 quarters' performance has improved as compared to the preceding 4 quarters. During the periods under consideration, its net profit has increased by 17% from RM18.0 mil to RM21.0 mil while turnover has gained 24% from RM88.0 mil to RM109 mil.
Valuation
Based on the closing share price of RM1.95 today & its 4 latest quarters' EPS of 21.0 sen, Lonbisc is trading at a PE of 9.2 times. At this multiple, I believe Lonbisc is still trading below its fair value, probably by about 10-15%.
Technical Outlook
Lonbisc has broken above its downtrend line at RM1.75/80 in July 2006. For the past 4 months, the share price has not been able to surpass the strong horizontal resistance of RM1.90/92. Today, the share price has surpassed this resistance to close at RM1.95, albeit on relatively thin volume.
Chart: Lonbisc's weekly chart as at Jan 23
Conclusion
If the share price can maintain above the RM1.90/92 level, Lonbisc would have a bullish breakout & its uptrend may commence. We must await confirmation of this tentative breakout, hopefully supported by a more convincing volume.
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