Huayang has just reported its results for QE30/9/2011, where its net profit increased by 21% q-o-q or 222% y-o-y to RM13.9 million. Its turnover has also increased by 23% q-o-q or 114% y-o-y to RM76 million. The strong growth in its top-line & bottom-line is attributable to the steady construction progress & better sales. In addition, you may also note that Huayang's net profit margin has grown steadily over the past 3 years, due to strong demand for properties in Malaysia.
Table: Huayang's last 8 quarters' result
Chart 1: Huayang's last 13 quarters' results
Chart 1: Huayang's net profit margin for the last 13 quarters
Corporate Exercise Outstanding
Huayang has proposed a 1-for-3 Bonus Issue where the entitlement date is fast approaching. That date is on October 28.
Valuation
Huayang (closed at RM1.64 this morning) is now trading at a PE of only 4.2 times (based on last 4 quarters' EPS of 38.37). At this PE, Huayang is deemed very attractive.
Technical Outlook
Huayang is in an uptrend line with support at RM1.26. It trades within an expanding triangle formation (or loud-hailer formation), with upside resistance at RM1.90 & support at RM1.10. In addition, the stock's immediate resistance is at RM1.70-1.72 while the support is at RM1.60. Over the next few days, the stock is likely to enjoy good buying support from retailers who seek bonus issue from the company. As such, the stock will probably trade between RM1.60 & RM1.70.
Chart 3: Huayang's daily chart as at Oct 20, 2011_12.10pm (Source: Quickcharts)
Conclusion
Based on good financial performance, management's generous capital management policy (2 bonus issues in 2 years) & attractive valuation, Huayang is a good stock for long-term investment.
16 comments:
alex, i have some concern regarding hua yang's balance sheet.
see my previous posting:
http://valueinvestinginmalaysia.blogspot.com/
as you can see, hua yang is in netdebt position of -69sen/share. i dont see cash coming in even as its sales and net profit keep increasing! buyers beware!
Hi messi,
The trade receivable is a bit high. But I looked at the overall current assets, regardless of the classification between prop development cost, trade debtors & other debtors, they are fairly consistent with the past. The land held for property development jumped by RM50 million & that was financed by long term loan (which increased by RM30 million) & equity. Current ratio is adequate at 1.8 times while gearing is manageable at 0.4 time.
I am okay with the financail position of Huayang.
Hi Alex,
The glove counters price were soaring today. Can you comment on supermx and latexx?
We already seeing so many counters experienced price dropped greatly after bonus issue. They dropped about 15-40% by ex-date. In this case, why recommend retailers to buy now? Not a good timing as current share price had already priced in the bonus issue. Recent rebound already 26% up. Just my view.
Alex. Please help me to analyze TAKASO this rubber stock. Yesterday all rubber stock IRCB, LATEXX and Supermx sharp rise. Then I look at TAKASO chart, it show TAKASO already break 18sen strong resistance and next target is 22sen. Am I correct ?
Hi Alex ,
Can u comment on Unisem for short term ?
Hi Evan
The technical outlook for Unisem is not clear. There are two downtrend lines that can be drawn onto the chart. If you use the downtrend line that began in April 2011, then the stock has an upside breakout. If you used the downtrend line that began in January 2011, then the stock has yet to achieve a breakout. Either way, the stock's immediate resistance is at RM1.20 & RM1.25.
Hi wong
You are right on TAKASO having broken above the horizontal resistance at 18 sen. Its next target is 21 sen & then at 24 sen.
Takaso is involved in making baby bottles & teats. It hardly made any profit when rubber latex prices were low and I doubt the change in the price of rubber latex would lead to better results for Takaso going forward. However, the company had a huge rights issue recently & I guess the market thinks that the share price has dropped to excess vis-a-vis the subscription price.
Hi Keen
supermx, latexx & other rubber glove companies are all rising on lower price for rubber latex and the strengthening USD. See the link below for rubber prices.
I have commented on this before & the same still applies.
http://www.rubbernet.com.sg/tocom2.htm
Hi alex ,
May u explain what is horizontal resistance and what will happen when its broken horizontal resistance ? =)
Hi Alex,
Thanks for your views shared. I realised Salcon seems to be moving upward consistently these few days. Can you share your opinions with us based on the chart?
Thank you.
Frank Ker
Hi FrankKer
Salcon has just tested its downtrend line resistance at RM0.50. If it can break above that level, the stock could turn bullish. Failure to do so would mean that the stock would continue to drift lower.
Hi Evan
A breakout of any resistance or support - horizontal or trend line- would mean that the stock can continue to go in the direction of the breakout. Failure to do so, would lead to a reversal of that immediate move.
you are so professional , thanks you alot ^^
let say for e&o , now the Resistance(1) is 1.422 and pivot is 1.417 , that mean it breakout the resistance and going to trend up ? If it below the Support(1), 1.403 and i will going to down trend ? is it like this ?
Hi alex, i bought in Huayang at 1.65, but then it dropped till 1.6 (if not mistaken), should i hold it till ex date or should i just sell it, which price would u recommend me to sell?
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