White Horse Bhd ('WTHorse') is involved in the manufacture & distribution of ceramic & homogeneous tiles. Its plants are located in Pasir Gudang Industrial Estate & Tanjung Langsat Industrial Complex; both situated in Pasir Gudang, Johore.
Past 5-year Financial Performance
From the table below, we can see that turnover has been flattish in the past 2 years despite the completion of the 3rd & 4th production line in the Tanjung Langsat Industrial Complex in the third quarter of 2006. These 2 new lines were originally projected to increase the group's output by 25%, but one can clearly see that the additional capacity has not boosted its turnover. This is probably due to a slowdown in the construction & property sectors in 2006.
Recent Financial Results
For QE30/6/2007, WTHorse's net profit increased by 33.4% q-o-q to RM10.5 million while turnover increased by 16.6% to RM104.6 million. When compared to the corresponding quarter last year, net profit declined by 9.9% on a the back of a 2.6% drop in turnover.
Current Financial Position
As at 30/6/2007, WTHorse's financial position is deemed satisfactory. Its liquidity position is healthy as reflected by its current & quick ratio of 1.36 & 0.60 respectively. Gearing ratio is low at 0.44 times its Shareholders' Funds. In term of working capital management, one will note that the inventory's turnover period has increased from 159 days as at 31/12/2006 to 172 days as at 31/6/2007 while debtors' turnover has declined from 98 days to 88 days during the same periods.
Valuation
Based on WTHorse's closing price of RM1.26 as at yesterday, the stock is now trading at a trailing PE of 6.33 times (using its past 4 quarters' EPS of 19.9 sen) or 0.6 times its book value (using its NTA per share of RM2.06 as at 30/6/2007). At these multiples, the stock is deemed inexpensive.
Technical Outlook
The stock made a high of RM2.65 in January 2005 (see Chart 1). Since then, the share price has been drifting lower. The stock has finally broken above that downtrend in either February or April this year (depending on how the downtrend line was drawn).
Chart 1: WTHorse's monthly chart as at October 16 (courtesy of Quickcharts)
After making a high of RM1.71 in May, the share begun to drift lower again. In the past week or so, the stock has tested the horizontal support at RM1.15 & rebounded (see Chart 2). In the rebound, the stock has broken above its short-term downtrend line at the RM1.22/23 level. WTHorse is now a fairly safe buy, though the uptrend has yet to commence.
Chart 2: WTHorse's daily chart as at October 16 (courtesy of Quickcharts)
Conclusion
Based on the improvement in the construction & property sector, I believe that WTHorse's financial performance will get better. WTHorse is now trading at undemanding multiples of 6.33 times its trailing earning or 0.6 times its book value. Technically speaking, the stock is also trading near its strong horizontal support of RM1.15, which means that the stock is a fairly safe BUY.
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