Adventa released its results for QE31/1/2011 yesterday. It is plain to see that the company is still badly affected by the high latex prices as well as the unfavorable forex movement. This dragged its net profit down significantly, resulting in a 66% q-o-q or 57% y-o-y drop in RM4.0 million. Its turnover continued to rise- gaining 17% q-o-q or 39% y-o-y to RM106 million.
Table 1: Adventa's last 8 quarterly results
Chart 1: Adventa's last 26 quarterly results
Financial Position
Adventa's financial position as at 31/1/2011 is fair. Its current ratio stood at 1 time, while debts to equity is quite elevated at 0.7 time. Since 80% of the borrowings were used to finance its working capital requirement, the high debts is deemed acceptable.
Valuation
Adventa (closed at RM2.37 today) is now trading at a PE of 12 times (based on last 4 quarters' EPS of 20 sen). At this multiple, Adventa is deemed fully valued.
Other Comment
The rubber glove sector has been badly affected by the rising latex prices & the strengthening of the RM vis-a-vis the USD. This coupled with the slight overcapacity in the sector has caused the players to adopt a more predatory marketing approach, resulting in margin deterioration. The recent correction in latex prices seems to have run its course & prices are rebounded. The recent recovery in USD has also fizzled out. All in all, the brief ray of hope as mentioned in my recent post has now been dashed.
Technical Outlook
Adventa is still in a downtrend line, with resistance at RM2.45.
Chart 2: Adventa's weekly chart as at Mar 31, 2011 (Source: Quickcharts)
Conclusion
Based on poor financial performance, full valuation & negative technical outlook, Adventa is rated as a SELL (or at best a HOLD).
10 comments:
Hi Alex,
What is your take on Axiata in terms of technical outlook? I had entered at 4.83. I felt the entry price is a bit on the high side. Hope you can help. Thanks.
hi, alex, my friend told me MINHO berhad, is very cheap... may i know your opinion on it?
and thanks 4 your comment on kian joo previosly
Hi sangkancil
At less than RM0.50 per share, Minho is cheap. It is also cheap when compared to its book value. However, it is not cheap when compared to its earning. Minho lost money for FYE31/12/2010 but reported a small profit for FYE31/12/2009. Nevertheless, its financial position is satisfactory, with adequate liquidity & lower leverage. For the share price to go up, it has to lift its level of profit substantially. How it can do so is the problem. Most timber downstream players in Peninsular Malaysia can hardly make decent profit. Maybe it should consider selling off the business & realize the NTA per share of RM2.56. Until then, the stock will remain a laggard.
Technically speaking, the share price may enter an upleg if it can break above the strong horizontal resistance at RM0.55.
Hi Fabien Wong
Axiata has broken below its long-term uptrend line at RM4.85 about 4 weeks ago. To recover above this uptrend line, it needs to go above RM5.00. Axiata could be in the process of attempting such a recovery since it has just broken above its short-term downtrend line at RM4.75-4.77. Can it make it? We will have to wait & see.
Hi ALex,
What is the technical outlook for TDM?Fundementally, it sounds great.
Currently, their is merging rumours between ECM and Kenanga.What is your view towards TA
Hi Alex,
what is your technical view towards TA and TDM.
Their is rumors between kenanga merge with ecm.
Fundamentally , TDM sound great.
Hi Alex
Any study made into Pelikan ? Will you recommend Pelikan to retailer ?
Hi cheer
Pelikan is a M&A machine, which keeps on acquiring companies. I like to see a more meaningful profit track record from this company. For now, the stock is in a medium-term downtrend line with resistance at RM1.35-1.37 & support at RM1.08-1.10. If you take a long -term view, Pelikan could be a good stock for investment.
Hi Alex, thanks for your view. Appreciate it. We shall see how Axiata performs in the next 2 months. In the long run, i'm still confident as their fundamentals still strong.
Hi ALex,
What is the technical outlook for Gamuda? Fundementally, it sounds great due to MRT.
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