Harison's net profit dropped 4.5% q-o-q & 0.8% y-o-y to RM8.3 million while its turnover dropped 4.5% q-o-q but rose 4.4% y-o-y to RM308 million for QE30/9/2011. The decline in turnover on a q-o-q basis was attributed to the termination of the distribution arrangement between F&N and Harison. This arose because Harison is now distributuing for Coca-Cola, which has in turn terminated the bottling arrangement with F&N. This has resulted in a break in its turnover growth for the past 11 quarters. However, prior to this, we can see that Harison's bottom-line & profit margin have been sliding for the past 3 quarters. The decline in profit margin coupled with a break in the turnover growth could be a sign of consolidation for this company.
Table 1: Harison's last 8 quarterly results
Chart 1: Harison's last 22 quarterly results (including profit margin)
An interesting piece of information was extracted from the past two quarters' Notes to the Accounts which enabled me to prepare the quarterly segmental results below. The huge pre-tax profit from the Others segment is interesting as no details was given. Equally interesting & mysterious is the huge amount of Eliminations. What could these two items be? Are they related to the termination of the F&N agency?
Table 2: Harison's segmental results for 3Q2011 & 3Q2010.
Valuation
Harison (closed at RM3.44 today) is now trading at a current PE of 6.3 times (based on last 4 quarters' EPS of 54.57 sen). At this multiple, Harison is deemed attractive.
Technical Outlook
If we use the 10-month SMA line as the uptrend line for Harison, we can see that the stock has broken that line. This means that the stock is likely to move sideway for a while. It may even enter into a downtrend, depending on its financial performance going forward.
Chart 2: harison's monthly chart as at Nov 1, 2011 (Source: Tradesignum)
Conclusion
Based on the uncertainty regarding the financial performance & the slightly negative technical outlook, I would rate Harison as a SELL INTO STRENGTH or REDUCE.
3 comments:
hi alex,
what do you think about tomei? it released a set of excellent result.
thanks
maxwealth88
I believe the investors concern about tomei's high gearing ratio and negative cash flow. If I m in tomei's shoes of course I will take the loan because there is still a winning margin. Imagine I loan RM10 to get RM15 sales. Why not. You can check degem and poh kong revenue both increased enormously as well. Only time will tell whether tomei will be fully valued. To me dividend yield has been good for tomei so I don’t care. I just need to be patient with it.
hi,
Is there any dividend declare for Harison ???
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