Adventa announced its results for QE30/4/2011 yesterday. Its net profit increased by 13% q-o-q but declined by 29% y-o-y to RM4.6 million, while turnover was lowered by 2% q-o-q but increased by 29% y-o-y to RM104 million. From Chart 1, we can see that the company's turnover has been rising steadily since 2006 while profit has been flattish during the same period, except for the steady decline in the past 4-6 quarters. This decline is attributable to higher input cost (especially, latex cost) which Adventa had failed to pass on completely to its customers. However, the latex prices are expected to decline further and this could lead to better financial performance for Adventa & other rubber glove producers. See Chart 2 below.
Table: Adventa's 8 quarterly results
Chart 1: Adventa's last 25 quarterly results
Chart 2: RSS3 prices from 2002 to June 2011 (Sorce: Rubbernet)
Valuation
Adventa (closed at RM1.96 yesterday) is now trading at a PE of 10 times (based on last 4 quarters' EPS of 19 sen). At this PE multiple, Adventa is deemed full value.
Technical Outlook
Adventa has been declining since it peaked at RM3.55 in January 2010. It broke the psychological RM2.00 level 2 days ago. Its next support is the long-term uptrend line at RM1.90 & then the horizontal line at RM1.85.
Chart 2; Adventa's weekly chart as at June 29, 2011 (Source: Quickcharts)
Conclusion
Based on recent financial performance, valuation & technical outlook, one would be hard pressed to make a case to invest in Adventa. However, the stock has been beaten down so much that its downside is likely to be limited. For those who have this stock, I think you are better off holding onto it. For the others with a contrarian streak & a long-term view, I believe investing in Adventa at RM1.85-1.90 level can be considered. Just don't bet your farm on it!
3 comments:
Hi Alex,
How do u calculate the ex price for TIME?
Hi Eric,
Time made a Offer for Sales of 8 Timecom shares for every 10 Time shares owned. The Offer price was at RM0.53, as compared to the yesterday close of RM0.74 for Timecom. Time closed at RM0.45. The computation of Time's theoretical ex-right value is as follows:
If you have 10 Time shares, you would enjoy a saving of RM1.68 for 8 Timecom applied for. The saving = 8 x (RM0.74-RM0.53). Then, you just divide the total saving by 10 Time shares to arrive at the saving per share of RM0.168. Then, you deduct this from the closing price of Time yesterday in order to arrive at the theoretical ex-right value of RM0.282. Bursa rounded it down to RM0.28 & called it the reference price.
Thanks Alex .
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