Titan reported good result for 4Q2006

In the past, I've noted the improved performance in Titan (here) as well as the share price breaking out of its downtrend line (here). Yesterday, Titan has announced a very good set of results for its 4Q2006. For that quarter, Titan's net profit has increased by 95% q-o-q or more than 19 folds y-o-y to RM241 million. This was achieved on a turnover of RM1.53 billion, which is marginally lower than the preceding quarter but 33%-higher than the previous corresponding quarter. What's important to note is that the improved performance was attributable to better polymer to naphtha margin, unlike the jump in 1Q2006 net profit which was due to recognition of excess of group's interest in the net fair value of an acquiree company, Chemicals Brothers Ltd of RM341 mil.

For the full year FY2006, Titan has reported a net profit of RM773 million, an increase of 145% over the net profit of FY2005. Even if the one-off exceptional gain from the excess of group's interest in the net fair value of Chemicals Brothers Ltd of RM341 mil were excluded, Titan's net profit would still have increased by 35%. Similarly, the indicative FY2006 EPS of 44 sen would be lowered to 24 sen.

Based on today's closing price of RM1.55 & the amended EPS of 24 sen, Titan would be trading at a PE of 6.5 times, a multiple which I would consider to be undemanding. Titan has also raised its dividend from 6% in FY2005 to 7.5% in FY2006. At this dividend payout, Titan's dividend yield is acceptable at 4.8%.

Based on the above, I believe Titan is a good medium-term buy at RM1.45-1.50.


Table: Titan's 8 quarterly results up to 4Q2006



Chart: Titan's daily chart as at Feb 13