BKoon's net profit for QE31.3.2007 jumped

Background

BKoon’s principal activities are:

1. Manufacture and trading of rebuilt, reconditioned and new commercial vehicles, forklifts, heavy machineries and the manufacture of bodyworks; &
2. Rental of commercial vehicles, forklifts, heavy manchineries, provision of fleet management and other related services.

BKoon has recently embarked on the re-conditioning of Mercedes Benz trucks. In addition, it has also ventured into the Indonesian market, which is expected to boost its business significantly.

Recent Financial Results

BKoon has just announced its results for QE31.3.2007. Its net profit increased by 32.8% q-o-q or 28.5% y-o-y to RM5.5 mil. Turnover has increased by more than 100% q-o-q or 27.5% y-o-y to RM53.7 mil. The substantially smaller turnover for the preceding quarter was attributable to a re-alignment of re-conditioned truck business & the production of heavy duty re-built which has longer lead time, but a better profit margin.

Current Financial Position

BKoon’s liquidity position as at 31.3.2007 is deemed adequate with current ratio at 1.7 times & quick ratio at 0.8 times. Debtors’ collection period at 109 days (of sales) and inventory turnover period at 151 days (of sales) is considered acceptable given the nature of business. Gearing ratio at 1.3 times is considered slightly on the high side.

Valuation

Based on the closing price of RM1.21 as at May 28 & EPS of 14 sen for the past 4 quarters, BKoon is now trading at a PE of 8.6 times.

Technical Outlook

The chart of BKoon is quite unexciting. Since its listing in April 2004, the share price has been moving in a sideway fashion, with higher ‘peaks’ as well as lower ‘troughs’. A break above the recent high of RM1.37 could signal a change of trend. We have to wait & see.

Chart: BKoon's weekly chart as at May 28 (courtesy of Quickcharts)

Conclusion

BKoon could be a good stock for the medium-term. When to buy is the trick. I believe that a better buy would be when the stock has finally broken out of its sideway pattern, i.e. when it has exceeded RM1.40. If you do so and if the price subsequently retraced back below RM1.40, you may want to sell off your position (i.e. set your Sell Stop at RM1.40).