Lion Diversified Holdings Berhad ('LionDiv') is involved in manufacturing and sale of steel products; property development and management; and manufacturing and sale of computer and related products.
Recent Financial Results
LionDiv's performance has improved steadily over the past 3 quarters. While the positive bottom-line in the previous 2 quarters (QE31/3/2010 & QE31/12/2009) have benefited from gains from the disposal of investment of RM51 million & RM31 million, respectively, its latest quarterly results is free from such exceptional item. The company believed that the recovery in steel consumption will continue in line with global recovery & this would contribute sigificantly towards better results for the company as shown in QE30/6/2010. For the segmental results, see Table 2.
Table 1: LionDiv's last 8 quarterly results
Table 2: LionDiv's results for QE30/6/2010 compared to QE30/6/2009 & QE31/3/2010
Chart 1: LionDiv's last 8 quarterly results
Financial Position
LionDiv's financial position is mixed as at 30/6/2010, with poor liquidity but acceptable gearing ratio. This is reflected in its current ratio of 0.9 time & gearing ratio of 0.4 time.
Valuation
LionDiv (closed at RM0.455 yesterday) is now trading at a PE of 1.4 times only (based on annualized EPS of 32 sen) or Price to Book of 0.2 time (based on NTA per share of RM2.09 as at 30/6/2010). Based on this, LionDiv is deemed very cheap.
Technical Outlook
LionDiv appears to have broken above its medium-term downtrend line at RM0.45. Its next resistance is at RM0.52 and then at RM0.54.
Chart 2: LionDiv's daily chart as at Sept 22, 2010 (Source: Quickcharts)
Conclusion
Based on improved financial performance, attractive valuation & positive technical outlook, LionDiv could be a good trading BUY as well as for long-term investment. However, its poor financial position is a matter of concern but since the share price is fairly low, one can take a risk by building up a small position in this stock.
I still think from past experiences, LionDiv has a poor track record of managing its capital. The front sight is that the industry is improving to trigger a positive upswing, but with questionable management team (or invisible hand behind the team) in play, its position is unclear at best!
ReplyDeleteHi Political Crow's Nest
ReplyDeleteYou could be right about the management team. However, even not-so-capable management cannot weigh a ship down if the tide rises.
Hi Alex,
ReplyDeleteWith today's closing at 0.505 (highest 0.52), do you think the momentum is strong enough to break through the 0.5 resistance strongly in the coming days/weeks and provide a long term way up?
regards