The past 4 quarters has not been good for Tongher. When compared to the preceding 4 quarters, Tongher's turnover has declined by 37% to RM253 million while net profit has plummeted by 99% to RM0.3 million. In term of net profit, Tongher's past 4 quarters was the worst that it recorded in the past 5 years (see Chart 1). The drop in top-line in the last 2 quarters has effectively put the company back to QE30/9/2005 or QE31/3/2006. The drop in turnover was attributed to competitive market.
Table: Tongher's 8 quarterly results
Chart 1: Tongher's last 27 quarterly results
Financial Position
Despite the poor performance in the past one year, Tongher's financial position is still very healthy. As at 30/9/2009, its current ratio is at 6.7 times while Bank Borrowings to Shareholders' Funds stood at 0.1 times. More importantly, its cash balance stood at RM157 million or RM1.24 per share.
Other Development
In August 2009, Tongher had advised that the European Communities ("EC") had initiated an anti-dumping and anti-subsidy proceeding concerning imports of certain stainless steel fasteners and parts thereof originating in India and Malaysia. This proceeding may affect Tongher's financial performance in the next few quarters.
Valuation
Tongher (closed at RM1.69 as at Dec 21) is now trading at a PE of 15.4 times (based on annualized EPS of 11 sen). Price to Book is at 0.8 times (based on NTA per share of RM2.16 as at 30/9/2009). At this multiples, Tongher is deemed fairly valued.
Technical Outlook
Tongher has been dropping after making a high of RM4.50 in 2007. It hit a recent low of just under RM1.50 in October 2008 before rebounding. Since the announcement of the anti-dumping & anti-subsidy proceeding by the EC in August, Tongher's share price has been drifting lower. Presently, it is sitting on its long-term uptrend line support at RM1.65. It has strong horizontal support at RM1.50.
Chart 2:Tongher's weekly chart as at Dec 21, 2009 (Source: Tradesignum)
Conclusion
Despite the recent poor financial performance & the uncertainty regarding the anti-dumping & anti-subsidy proceeding by the EC, Tongher may be a good stock for very long-term investment. Its financial position is very healthy and its downside is limited as it has good support at RM1.50-65.
11 comments:
Hi Alex,
For the Scomi-LA, is that good to buy it now? Do you think scomi for long term is a good share? so that we can keep the LA and then convert to Scomi. Is that the LA can convert to mother share anytime from now?
hi Alex,
any comment on MAS rights issue? is it worth it?
thanks
Hi Alex
Any idea about new stock "HANDAL" ?
A very "Merry Christmas" to you and the readers.
There might be some upside for Financial and Auto stocks. Beware of Scomi as the right issue stock starts trading next week (Possible of push up and run scenario by some.)
Hi Alex,
Any comment on Inch Kenneth (plantation) and SAAG?
Hi Teh,
Scomi-LA can be converted to the mother share any time. Scomi will be a long-term investment. Despite being an Oil & Gas stock and having the technology to carry LRT & Monorail jobs (via its subsidiary, Scomi Engineering), Scomi is being totally ignored due to political reason. If you get into the stock (or, Scomi-LA), you have to be very patient.
Hi MaxWealth88,
MAS does not excite me. Its financial performance is too erratic. Its full potential will not be realized due to competitive pressure from Airasia.
In August 2006, it broke above its medium-term downtrend line at RM2.70 & flew to a high of RM5.50. In April this year, it again broke above its medium-term downtrend line at RM3.00. However, it only managed to hit a high of RM3.40 before consolidating in a bullish wedge (or, descending triangle) with support at RM2.80 & resistance at RM3.15. A break above RM3.15 will be bullish and vice versa.
The Rights Issue of 1-for-1 at RM1.60 may lead to a short play based on the above technical set-up. The Rights Issue at deeply discounted price may hold some appeal to retailers.
Hi David,
HANDAL is a full integrated offshore crane service & manufacturer specializing in the Oil & Gas sector.
Its IPO price was set at 72 sen. Net Assets per share was at 53 sen. Its past 2 years' net profit was about RM9 million [RM9.25 million for FY2008 & RM8.71 million for FY2007]. Assuming a net profit of RM9 million for current year, its EPS is about 10 sen. Based on the closing price of 80 sen as at Dec 24, the stock is trading at a PE of 9 times or P/Book of 1.5 times. That's a fair price for the stock, ignoring additional earning from new business expansion using funds from the Public Issue.
On December 22, this stock hit a low of 75 sen with good volume before rebounding. We do not know whether the selling has been completed but if the low of 75 sen is not violated on the next selldown, it may be a good level to accumulate the stock. As a rule, I like to see one or two quarters of results before forming an opinion on a stock.
Hi solomon,
"Merry Christmas" to you too.
Stocks are still holding up pretty well. Economic news are getting better or more encouraging. This may lead to another wave of buying in the market and possibly a positive month for January next year. Chartwise, Nasdaq & S&P500 had just made new high.
For reading on the January effect vs. the January Barometer & a negative January Effect, check out the two links below.
http://www.marketwatch.com/story/the-january-effect-vs-the-january-barometer
http://allfinancialmatters.com/2008/01/20/what-does-a-negative-january-mean-for-the-rest-of-the-year/
Hi Thomas,
I have not looked at the accounts of Inch Kenneth or SAAG. I'll give you my technical take for these stocks.
Inch Kenneth is in an uptrend line, with support at RM0.41-42. It has a strong horizontal support at RM0.44-45. SAAG is in a downtrend. It may test its strong horizontal supprt at RM0.15-16.
Between the two stocks, I would favor Inch Kenneth.
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