Topglove has recently released its results for QE31/5/2010, where its net profit increased by 53% y-o-y on the back of a 49%-increase in turnover. However, its net profit declined by 8.6% q-o-q despite a 9.0%-increase in turnover. The q-o-q decline in net profit was attributable to a 24%-increase in latex prices as well as a 3% weakening in USD. Topglove is optimistic that the drop in its bottom-line in QE31/5/2010 would be reversed in the next quarter as latex prices has eased off (by 7% as at 1/6/2010) and the USD has rebounded.
Table 1: Topglove's last 8 quarterly results
Chart 1: Topglove's 16 quarterly results
Chart 2: Topglove's 16 quarterly results
Valuation
Topglove (closed at RM12.92 last Friday) is now trading at a PER of 15 times (based on last 4 quarters' EPS of 86 sen). This multiple is reasonable if Topglove can maintain its earning growth going forward. Can it?
Technical Outlook
Topglove is still in an uptrend but it looks toppish. At this moment, the 10 & 20-week SMA lines are still above the 40-week SMA line. As such, Topglove is rated a HOLD.
Chart 3: Topglove's weekly chart as at June 18, 2010 (Source: Tradesignum)
Conclusion
The drop in Topglove's profit margin could be a sign of tougher times ahead for rubber glove makers. However, the stock is still rated a HOLD as the technical outlook is still positive, albeit a bit toppish.
7 comments:
Would you mind comment on CYL and MBF holding. Currently, CYL trade cum dividend of 4sen TE, give rise to dividend yield of more than 7%. On the other hand, MBF has also proposed 10sen dividend subject to approval on upcoming AGM, give rise to dividend yield of more than 13% !
" Topglove (closed at RM12.92 last Friday) is now trading at a PER of 15 times (based on last 4 quarters' EPS of 86 sen). This multiple is reasonable if Topglove can maintain its earning growth going forward. Can it? "
~ The same kind of sayings were repeated for the past several quarters. I believe The management can deliver. Long it big time.
~ sgbuaya.blogspot.com
hi alex,
what is your thoughts on starhill reit? i'm thinking to switch to reit since index is so high now.
thanks
maxwealth
Hi Alex,
Need your comment on SEB.
Hi hng,
MBfH is a very diversified conglomerate with subsidiaries involved in credit card, car dealership & plantation. For QE31/3/2010, its net profit increased by 311% y-o-y from RM12.3 million to RM38.2 million. This was partly due to the inclusion of a “non recurring gain of RM17.50 million consequent to the resolution of litigation between the Company and AmBank (M) Berhad”. Turnover increased by 3.6% from RM441 million to RM457 million due mainly to the trading operations in Papua New Guinea (“PNG”) and the retail businesses in Fiji. Based on the results for QE31/3/2010, MBfH's annualized EPS is about 14 sen.
For FYE31/12/2009, it reported a net profit of RM112.6 million on turnover of RM1.897 billion. However, its performance was also boosted by non-recurring income of about RM66 mil (the bulk of which came from write back of RM61 mil on debts and interest).
At yesterday price of RM0.73, MBfH is trading at a PER of about 5 times (based on estimated full-year EPS of 14 sen). At this multiple, MBfH is deemed quite attractive.
The failed Privatization of MBfH by way of a proposed Selective Capital Reduction and Repayment exercise (‘SCR’) at RM0.65 per MBfH Share could be used as a benchmark of the fair value of this stock. Finally, the company has just proposed a 10 sen dividend less 25% tax (pending shareholders' approval).
However, the upside for MBFH maybe limited as it has a strong horizontal resistance at RM0.75. If you get into this stock, you are looking for the huge dividend payout. Would the share price adjust downward fully after the payout? Maybe not, since the stock has a relatively lower PER. As such, it looks like a BUY.
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CYL produces plastic products as well as the consumer toiletries and detergent, automotive lubricant, pharmaceutical and food industries.
CYL (closed at RM0.565 yesterday) is trading at a PER of 15 times [FY2010 EPS of 3.75 sen]. As such, CYL is fully valued.
Chartwise, CYL has strong resistance at RM0.55-56. Its next resistance is at RM0.60. Again, the upside is limited. You are looking to get the 4 sen dividend. However, CYL's share price may adjust downward fully after the payout as the stock is trading at fairly high PER. As such, the case for a BUY for CYL may not be strong.
Good luck.
Hi MaxWealth88,
Starhill REIT has a dividend yield of 7.9%. This is fairly commendable as REITs listed on our exchange have dividend yield of 7.0 to 8.4%. It also trades at Price to Book of 0.73 times (based on NTA of RM1.20 per share). Again, not expensive.
However, it is facing strong horizontal resistance at RM0.88 which is capping its upside. If it can break above that level, it may go to RM0.91-92 and then RM0.95-96.
Many treat REITs like bonds, which yield decent income & hopefully slow but steady capital appreciation over time. If that satisfy your objective, you may go for it.
Hi Pan,
If you have followed the development in Success Transformer, you would get the impression that Seremban Engineering is a good company. However, its first reported financial results after its listing has been a disappointment. It made a net loss of RM266k on a turnover of RM6.4 million. After a heightened expectation, a disappointment like this would lead to a period of re-examination & possible sell-off. We will have to wait for 2 or 3 quarterly results before we can revise or revisit our earlier favorable opinion on this stock.
For your information, Seremban Engineering is involved in the fabrication of process equipment and metal structures, and the provision of maintenance and shutdown services.
About 70% of the company’s current order book comes from the domestic market. The palm oil sector formed the bulk of the order book, contributing about 56%, while the oil and gas sector made up about 11%.
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