Kwantas is involved in Oil Palm Cultivation & Processing of FFB; Trading of Industrial Products; and, Biomass Energy.
Recent Financial Results
For the QE31.302007, Kwantas' net profit increased by 88.3% q-o-q to RM22.9 million. Turnover has increased by 13.9% q-o-q to RM496 million. The improved performance was attributable to higher CPO prices; better products margin from increased palm & soya bean oil processing volume in China; as well as trading in refined palm products in China, India & Pakistan.
Current Financial Position
As at 31.3.2007, Kwantas' gearing position is deteriorated to 1 times from 0.9 times as at 30.6.2006. Although liquidity is still tight, it has improved marginally as reflected by the slight increase in current ratio (from 0.83 to 0.90 times) & quick ratio (from 0.50 to 0.52 times). The increase in the current ratio was due to higher inventory (where inventory turnover has inched up from 32.4 days to 36.2 days of sales) and higher trade receivable (where debtors' collection period has jumped from 13.3 days to 27.2 days of sales).
Valuation
Based on the closing price of RM4.80 for today and its EPS of 38 sen for the past 4 quarters, Kwantas is now trading at a PE of 12.6 times. Kwantas' PE multiple is not expensive given its steady growth in the past 1 year.
Technical Outlook
The stock is currently trapped in a symmetrical triangle. A break to upside of RM4.90/5.00 could signal the continuation of its prior uptrend.
Chart: Kwantas' daily chart as at May 28 (courtesy of Tradesignum.com)
Conclusion
Kwantas could be a good stock for medium-term investment. A trading buy when the share price surpasses the RM4.90/5.00 level is also an attractive proposition. Sell stop at RM4.70 may be prudent.
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