Tong Herr Resources Bhd ('Tongher') is involved in the manufacture & sale of stainless steel fasteners such as nuts, bolts, screws & other threaded items. [I've recommended a BUY of this stock in November last year when the stock was trading at RM4.00.(go here)]
Recent Financial Results
Tongher has just announced its results for FYE31/12/2006. For QE31/12/2006, its topline continued to show impressive growth but its bottomline has declined marginally when compared to the preceding quarter. The company attributed the drop to escalating raw material costs.
For the FY2006, Tongher's net profit has increased by 87% to RM55.8 million, which was achieved on a 51%-increase in turnover to RM303 million.
Valuation
Based on its FY2006 EPS of 60.15 sen & its closing price of RM4.42, Tongher is now trading at a PE of 7.4 times.
Technical Outlook
Today, Tongher's share price has broken above its recent high of RM4.36, which is equivalent to its high in December 2004 (see Chart 1 & 2 below). The breakout leading to this new all-time high is a very bullish development. You will note that the share was attracting steady buying for the past 4 weeks prior to today's breakout. If the share price can hold above the breakout level of RM4.36/38, I expect the share price is likely to continue its steady rise from hereon.
Chart 1: Tongher's daily chart from March 2006 to 26 Feb 2007
Chart 2: Tongher's daily chart from Dec 2004 to 26 Feb 2007
Conclusion
Based on strong growth in topline & bottomline as well as a bullish technical outlook, Tongher is a very good BUY for the medium-term.
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