HLInd's net profit jumped in QE31/12/2007

HLInd's main businesses are in semiconductor, motorcycles & building materials. It has just reported its results for 2Q2008 ended 31/12/2007, where its net profit increased by 41.1% q-o-q or 29.6% y-o-y to RM53.1 million, while its turnover increased by 5.8% q-o-q or 13.8% y-o-y to RM782 million.

Two of its main business segments, i.e. the semiconductor & motorcycles had improved their operating profit in 2Q2008. The semiconductor division- carried out by its subsidiary, MPI- had reported a 64.6% q-o-q increase in pre-tax profit from RM41.0 million to RM67.5 million on the back of a 9.9% increase in turnover from RM386 million to RM424 million. Due to a poorer performance in 1Q2008, the semiconductor division's 1H2008 reported a 7.9% y-o-y decline in operating profit from RM125.5 million to RM115.6 million. The motorcycles division maintained its steady performance in 2Q2008. For 1H2008, this division reported a 60.6% y-o-y increase in operating profit from RM52.7 million to RM84.7 million.



Based on its closing price of RM4.30 as at February 26, HLInd is trading at a forward PE of 7.2 times (based on an annualized EPS of 69 sen) or at a Price to Book of only 1 times (based on NTA per share of RM4.36 as at 31/12/2007). At these multiples, HLInd is considered inexpensive.

HLInd has dropped back from its recent high of RM6.10 recorded in November last year. Its immediate resistance is RM4.40, while support can be seen at RM4.10 & RM3.80. A tentative uptrend line can be drawn from its low of RM2.82 recorded in November 2005 & this uptrend line may provide support at RM3.76-80.


Chart: HLInd's weekly chart as at February 26, 2008 (courtesy of Quickcharts)

Based on improving performance, HLInd maybe a good BUY for the long-term. The catalyst for a re-rating of this stock could be a more sustained good performance from its semiconductor division and a pick-up in housing development sector, which may boost HLInd's underperforming building materials division.