Toyo Ink Group Bhd ('ToyoInk') manufactures printing inks for the printing and packaging industries. Its products include Varnishes, Solvent Ink and Water-Based Ink.
ToyoInk has generated some excitement after it signed a deal with Binh Duong province in southern Vietnam to lease land for building a power plant in 2007. Details of this deal are rather scanty (go here). The proposed power plant is reported to be a 1,200 megawatt (MW) coal fired power plant costing USD1 billion (go here). After more than two years, the deal has not come to fruition (go here).
Recent Financial Results
ToyoInk's performance is unexciting. It suffered net loss of RM3.8 million in QE31/3/2009 due to "higher cost of raw materials coupled with the weak market demand in this quarter caused by the global economic slowdown". It recorded a decent net profit of RM3.9 million in the last quarter, QE30/9/2009.
Table: ToyoInk's 8 quarterly results
Chart 1: ToyoInk's last 18 quarterly results
Valuation
ToyoInk (closed at RM1.90 in the morning session today) is now trading at a PER of 15 times (based on its EPS for FYEMar2008 12.4 sen). At this PER multiple, ToyoInk is fully valued.
Technical Outlook
From the daily chart (Chart 2 below), ToyoInk is now pressing against the channel line at RM1.83-85. In addition, it has also surpassed the overhead long-term downtrend line at RM1.83-85. All these point to a bullish breakout for the stock. Why? Could it be due to a positive development in the Vietnam power plant deal? Only time will tell...
Chart 2: ToyoInk's daily chart as at Dec 31, 2009_11.18am (Source: Quickcharts)
Chart 3: ToyoInk's weekly chart as at Dec 31, 2009_11.14am (Source: Quickcharts)
Chart 4: ToyoInk's monthly chart as at Dec 30, 2009 (Source: Tradesignum)
Conclusion
Based on technical breakout, ToyoInk could be a trading BUY now. However, the fundamentals of the stock is unexciting & if the much-anticipated Vietnam power plant deal does not pan out favorably, the stock could correct sharply.
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