Thursday, March 10, 2011

Kianjoo- an attractive stock for long-term investment

Background

Kian Joo Can Factory Bhd ('Kianjoo') is involved in the manufacture in tin cans, aluminium beverage cans & corrugated fibreboard cartons and contract packing.

Recent Financial Results

Kianjoo's financial performance for FY2010 has improved significantly due to higher sales & improved cost efficiency in the cans & contract packing divisions. For QE31/12/2010, Kianjoo's net profit declined by 26% q-o-q to RM23.5 million while turnover increased by 7.6% to RM279 million. The drop in net profit is attributable to writing down of raw material cost & addditional accruals for staff performance rewards.


Table 1: Kianjoo's last 8 quarterly results



Chart 1: Kianjoo's last 17 quarterly results

Financial Position
[Note: This section was added subsequently on Mar 10, 2011.]

Kianjoo's financial position as at 31/12/2010 is deemed satisfactory. Its current ratio stood at 2.8 times while its borrowings is very small (mostly for working capital requirement) as reflected by debts to equity of 0.1 time.

Valuation


Kianjoo (closed at RM1.87 yesterday) is now trading at a PE of 8 times (based on EPS of 23 sen for FY2010). For a well-established company that holds the leading position in its sector, Kianjoo's valuation is deemed very attractive. The discount could be attributable to the protracted shareholders' quarrel that is still not resolved.

Technical Outlook

Kianjoo is still in an uptrend, with support at about RM1.80 (see chart 2 below). The stock faces a strong horizontal resistance at RM2.00 (see Chart 3 below). If it can surpass that level, it may test the next horizontal resistance at RM2.70-2.80. The stock seems to be moving higher in a irregular upward channel, with support at RM0.90 & resistance at RM2.80.


Chart 2: Kianjoo's daily chart as at Mar 9, 2011 (Source: Quickcharts)



Chart 3: Kianjoo's monthly chart as at Mar 1, 2011 (Source: Tradesignum)

Conclusion

Based on attractive valuation, good financial performance & favorable technical outlook, Kianjoo could be a good stock for long-term investment.

9 comments:

leslieroycarter said...

Hi Alex:
May u comment on bornoil n its fundamental. Thanks in advance

ryan said...

hi alex,

u have been writing some inexpensive valuation counters such as hpi,mnrb,ltkm,harison. what about tomei?

yhtan said...

Hi alex,

May i ask did they pay out bonus issue? or is just a proposal waiting for approval?

Alex Lu said...

Hi yhtan

I don't think Kianjoo had a bonus issue recently. I am not sure whether there is any proposal to do one any time soon.

Alex Lu said...

Hi ryan

Tomei is a profitable retailer of gold jewelery. It reported a net profit of RM21 mil for FY2010 as compared to RM18 mil las year. EPS for FY2010 was about 15.6 sen. At current price of RM0.63, it is trading at a PE of 4 times only.

Its financial position is adequate, with current ratio at 2.2 times but gearing at 0.8 time. The high gearing ratio is due to the need to hold high level of inventory which was financed by short-term borrowings.

Chartwise, the stock is still in an uptrend, with RM0.58-0.60.

Based on the above, it could be a good long-term investment stock.

Alex Lu said...

Hi leslieroycarter

I always have a very poor impression of Bornoil. Its fast food operation is money-losing operation. Its oil & gas operation isn't what you expect. If I'm not mistaken, it's involved in the distribution of motor vehicle engine oil, which should rightfully be classified as trading services. But, it did have substantial vacant land in Sabah. For QE31/10/2010, these properties were revalued- yielding a gain in fair value of investment properties of RM 80.74 million. As a result thereof, Bornoil reported a net profit of RM80.34 million for that quarter. If this one-off item is excluded, it would incur a net loss of RM2.93 million for 9-month ended 31/10/2010 (as compared to a loss of RM4.27 million for same period last year). For FYE31/1/2010, Bornoil made a loss of RM3.9 million- an improvement over a loss of RM14.4 million recorded in FYE31/1/2009.

From the above, you can see that Bornoil is fundamentally a very weak stock. It derived its value from its property investment. We have a few such stocks on our exchange & their share price can rally handsomely when the time is right. When the market entered into a bear phase, these stocks would go into hibernation for years. I am very weary dealing in these stocks.

yhtan said...

I guess is still under proposal, saw the announcement here

http://www.klse.com.my/website/bm/listed_companies/company_announcements/announcements/historical.jsp

Alex Lu said...

Hi yhtan

I saw the announcement. Kianjoo proposed a 1-for-2 bonus & a 1-for-4 rights issue of warrant at RM0.01 each (after the bonus). This proposal could boost the share price a bit.

James Jr said...

Dear Alex,

Currently im holding kian joo share and they jus announce issue bonus share but in the annoucement never mention when wil us receive it, do you know abt the process?