Eksons Corporation Bhd ('Eksons') is involved in the manufacture & sale of veneer, plywood & sawn timber.
Recent Financial Results
For QE30/6/2010, Eksons's net profit increased by 302% y-o-y to RM9.2 million on the back of a 20%-increase in turnover to RM70 million. As compared to the immediate preceding quarter (QE31/3/2010), its net profit declined by 7.2% on the back of a 2%-decline in turnover. The decline in net profit was because the results for QE31/3/2010 includes an income of RM9.9 million arising from an adjustment to development cost recognized in the acquisition of Rusella Teguh SB.
Table: Eksons's 8 quarterly results
Chart 1: Eksons's last 8 quarterly results
Financial Position
Eksons's financial position as at 30/6/2010 is deemed very healthy with current ratio of 3 times and very little bank borrowings (of RM38 million) as compared to its shareholders' funds of RM371 million.
Industrial Outlook
Prices of timber and timber products are beginning to inch higher (see Chart 2 below). The higher prices should translated into better profitability for Eksons & other timber companies.
Chart 2: Prices of Timber & Timber products (Source: International Tropical Timber Organization, ITTO)
Valuation
Based on its close of RM0.945 today, Eksons is trading at a PE of 4.2 times (based on an annualized EPS of 22.5 sen). At this multiple, Eksons is deemed quite attractive. Assuming a PE of 7 times (for mid-size company), Eksons's fair value is about RM1.58.
Technical Outlook
Eksons is rising gradually after it broke above its downtrend line in April 2009. Its immediate horizontal support is at RM0.90-91 and its strong horizontal resistance is at RM1.25.
Chart 3: Eksons's weekly chart as at Sept 3, 2010 (Source: Quickcharts)
Conclusion
Based on better timber prices, improving financial performance, strong financial position, attractive valuation & finally positive technical outlook, Eksons is considered a good stock for medium-term investment.
7 comments:
Hi Alex,
Ni hoa.
Would you kindly provide a bit more detail about White Horse. Current price of 1.66 is a safe buy ?
Your last write on this company was 2007
Thanks
AL
Yup. Pls comment WTHorse and Perisai
Dear Alex,
Wondering what's your comment on TALAM. It has been on one of the top volume for weeks but the price is still not pretty right now. After OSK's paper regarding property stocks (TALAM was mentioned too), I was wondering if it's a good idea to absorb it since it's really low right now?
Thanks!
Hi Ai Ling & Cheer
WTHorse is trading at a PE of 6.4 times (based on close of RM1.66 & 1H2010 EPS of 12.88 sen). Price to Book is at only 0.64 time (based on NTA per share of RM2.61).
Chartwise, WTHorse has broken above its horizontal resistance of RM1.60. This level will now be a strong support. Thus, it's a good entry level for the stock. Its immediate resistance is the horizontal line at RM1.75 & then at RM1.95.
Hi cheer
Perisai's financial performance for 1H2010 has deteriorated substantially compared to last year. Its net profit dropped by 64% to RM12 million while turnover declined by 44% to RM37 million. Based on close of RM0.49 & IH2010 EPS of 1.81 sen, Perisai is trading at a PE of 13.5 times. At that multiple, it's deemed overvalued.
What's worrying is its financial position- low current ratio of only 0.88 time & high bank borrowings to shareholders' funds of 0.85 time. The company needs to recapitalize if it intends to get big contracts.
Chartwise, it has been in a downtrend since 2005, dropping from RM1.40 to a low of RM0.40. Being a speculative stock, it enjoyed occasional rallies, such as the huge rally from June 2007 to February 2008 and again in April to May 2009. Presently it is testing its horizontal support at RM0.48 & a breakdown below this level could send the stock to its all-time low at RM0.42. If the stock can survive the test of the low, it could be a trading BUY. However, it must be noted that this is a high risk, high reward trade.
Hi steve
Talam (closed at 9.5 sen yesterday) is cheap in absolute term because it's a stock with a par value of 20 sen. Based on its financial statement as at 30/4/2010, Talam looks relatively cheap when compared to its net assets value of 26 sen- giving at Price to Book of 0.37 time. However, Talam has difficulty selling its properties because the location of its land is not desirable. This is further aggravated by its tight financial position. The latter may have changed now as it has completed its restructuring scheme recently. Talam was uplifted from PN17 in June this year. This can only be seen once the accounts for QE31/7/2010 has been announced. As at 30/4/2010, Talam has borrowings of RM535 million & Convertible Bonds of RM383 million and Shareholders' Funds of RM643 million.
Technically speaking, Talam may have support at at the horizontal line of 8-9 sen.
hi alex. many ppls think to buy BJCORP at current price and hold it. can bro analysis the BJCORP financial fundamental ? is it worth to buy now and hold for it ?? it there any upside for this stock ??
thx bro.
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