Wednesday, April 28, 2010

Nylex, an attractive value stock


Nylex & its subsidiaries are principally involved in the manufacture and marketing of vinyl-coated fabrics, calendered film and sheeting and other plastic products, including geotextiles and prefabricated sub-soil drainage systems; manufacture and marketing of rotomoulded plastic products including bulk chemical containers, road barriers, playground equipment and disposal bins; distribution, manufacture and sale of petrochemical and industrial chemical products and manufacture and trading of polyvinyl chloride (more commonly known as PVC) and polyurethane ("PU") synthetic leather, films and sheets and metal roofing products.

Recent Financial results

Nylex has announced its results for QE28/2/2010, where it reported a net profit of RM8.9 million on a turnover of RM296 million. Its net profit declined marginally by 4% from the immediately preceding quarter (QE30/11/2009) but compared favorably to a net loss of RM2.6 million in the previous corresponding quarter (QE28/2/2009). The turnaround was attributable to improved market condition which allowed the group to raise selling prices & secured better profit margin.

Table: Nylex's last 8 quarterly results

Chart 1: Nylex's last 17 quarterly results


Nylex (closed at RM0.80 yesterday) is now trading at a PER of 4 times (based on annualized EPS of 20 sen). At this multiple, Nylex is deemed quite attractive.

Technical Outlook

Nylex has broken above its medium-term downtrend line (SS) at RM0.75-77 in January. The stock seems to be consolidating in a pennant formation, with resistance at RM0.84-85. If it can break to the upside of the pennant, the upleg may begin. Its first resistance would be the horizontal line RM0.87-88 & then RM1.20.

Chart 2: Nylex's weekly chart as at April 27, 2010 (Source: Quickcharts)


Based on attractive valuation, Nylex could be a good stock for a medium-term investment.

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