Success Transformer Corp Bhd ('Success') is involved in in the manufacture and sale of electrical apparatus and industrial lighting; the production and sale of metal products (focusing on metal stamping parts and metal casings); manufacture and fabrication of process equipment (such as unfired pressure vessels, heat exchangers, tanks, and silos) & other machinery and parts (including mechanical works, maintenance services, and shutdown works); and hiring and servicing of machinery equipment.
New Corporate Development
In late February, Bursa Securities had approved the listing Seremban Engineering Berhad (formerly known as Seremban Engineering Sdn Bhd) ('SEB')on the Industrial Products sector of the Main Market of Bursa Securities. The wholly-owned SEB was acquired for a sum of RM36.408 million, with the first tranche of 60% acquired for RM14.628 million in December 2006 & the second tranche of 40% acquired at RM21.780 million in April 2008. I have appended below the track record of SEB from 2003-2007. For 2007, SEB recorded a net profit of RM6.3 million on the back of a turnover of RM53 million.
Table 1: SEB's financial results from 2003 to 2007
The listing of SEB is likely to include an offer for sale to the shareholders of Success. The exact ratio of SEB shares to be offered to Success's shareholders has not announced yet. The prospectus for SEB IPO has yet to be uploaded onto Bursa's website. Nevertheless, this 'carrot' may be just the catalyst needed for a play in Success.
Recent Financial results
Success has recently announced its results for FYE31/12/2009. For 4Q2009, its net profit increased by 4.4% q-o-q or 20.5% y-o-y to RM6.5 million while turnover increased by 10.3% q-o-q or 25.5% y-o-y to RM52.8 million.
Table 2: Success's 8 quarterly results
Chart 1: Success's 11 quarterly results
Valuation
Success (closed at RM1.21 yesterday) is now trading at a PER of 5.6 times (based on FY2009 EPS of 21.5 sen). At this multiple, Success is deemed fairly attractive. If you valued Success at a PER of 8 times, its fair value is about RM1.72.
Technical Outlook
Success is rising in a gradual uptrend, guided by 50 & 100-day SMA lines. The support given by these SMA lines is around RM1.20. Its immediate horizontal resistance is at RM1.35.
Chart 2: Success's daily chart as at Mar 2, 2010 (Source: Quickcharts)
Conclusion
Based on good financial performance, attractive valuation, positive technical outlook & upcoming listing of its subsidiary (SEB), Success is a good stock for a medium-term investment.
8 comments:
Hi, Alex
Any comments on Maxis? Really appreciate your comment.
Thanks
thanks Alex for your write-up on Success. i like its fundamentals very much, just that the price is trading at a very tight range and seems to be illiquid.
regards
maxwealth
Hi Durian Edge,
I posted recently about Maxis's possible bullish breakout above the RM5.50 horizontal resistance. That did not materialize and would probably never materialize any time soon after the results announcement where Maxis reported a net profit of RM503 million for QE31/12/2009 (or, quarterly EPS of 6.7 sen). The net profit was lowered by two one-off expense items, i.e. RM53 million discount given to retails investors for the listing exercise & RM24 million incurred for the listing exercise. If these expenses are added back, then its net profit would be about RM580 million (or, quarterly EPS of 7.7 sen). This should translate to a full-year EPS of 31 sen- giving Maxis a PER of 17.6 times. Thus, Maxis is deemed fully valued.
Compared the last few days market action for Axiata & Maxis and you will get a feeling that some funds had shifted from Maxis to Axiata to ride on Axiata's better growth prospect going forward.
Hi Maxwealth88,
Yes, Success is a quiet and relatively inexpensive stock. With a catalyst in the form of the listing of a subsidiary, Success is likely to see more upside than downside. That's the kind of stock that we should have in our portfolio in uncertain time, such as now.
Thanks, Alex for the info.
Hi Alex, thanks for your advice.
regards
maxwealth88
Success Transformer has outstanding businesses in lighting, transformers and fabrication. It is trading at amazingly cheap prices.
no discount wil be given for success shareholder to subcribe SEB, so how u think ?
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