Over the past 4 weeks, DKSH has been dropping very sharply after it hit a high of RM2.37 on November 21. The stock broke its accelerated uptrend line (S1-S1) at RM1.75 on December 12 as well as the strong horizontal support at RM1.50 on December 19. Its immediate support is the horizontal line at RM1.30-1.35. Below that, its next support is the intermediate term uptrend line (SS) at RM1.05.
Chart 1: DKSH's weekly chart as at Dec 19, 2011 (Source: Tradesignum)
Let's compare DKSH with a similar trading house, Harison. Harison is holding above its horizontal line at RM3.40. During the recent selldown, Harison tested its long-term uptrend line (SS) support at RM2.80. Can Harison hold onto the current horizontal support of RM3.40?
Chart 2: Harison's weekly chart as at Dec 19, 2011 (Source: Tradesignum)
Financial Performance Indicators & Ratio compared
Which is a better stock? I have tabulated the financial performance indicators & ratio for your easy reference. For the 9-month ended 30/9/2011, DKSH's net profit improved substantially while Harison's bottom-line remained unchanged. As a results, DKSH's ROCE improved from 11.6% to 19.3% while Harison's ROCE slid from 12.5% to 11.9%. However, it must be noted that DKSH is highly geared, with debts to equity of 0.9 time & total liabilities to equity of 4.4 times. Harison appears conservative with debts to equity of 0.2 time & total liabilities to equity of 0.8 time.
Table: DKSH & Harison's financial performance indicators & ratio compared
Valuation
In term of valuation, Harison (closed at RM3.46 yesterday) is now trading at a PE of 6.9 times (based on the 9-month results which yield an annualized EPS of 49.84 sen). DKSH (closed at RM1.39 yesterday) is now trading at a PE of 5.0 times (based on the 9-month results which yield an annualized EPS of 27.99 sen).
Conclusion
While DKSH trades at a lower PE multiple, I am not confident that it can maintain its recent strong results. DKSH has a long history of lackadaisical performance while Harison is noted for its steady growth. Despite the lower PE multiple and recent strong growth in its bottom-line, I am wary of DKSH. I still prefer Harison as it is a financially stronger while DKSH shows signs of over-trading - which may not be a healthy practice in the challenging times ahead.
6 comments:
Hi Alex,
Please let me know what do u think about DKSH now ? Why its share price shoot so high now ?
Thanks
Hi networking
DKSH has really surprised me. Its net profit rose from RM44.1 mil to RM77.7 mil in FY31/12/2012. Revenue rose from RM4.26 bil to RM4.75 bil. EPS rose from 28.0 sen to 49.2 sen. At the price of RM3.92, it is trading at a PE of 8 times. As such, DKSH is fairly attractive.
Chartwise, it had a sharp upside move recently. It may consolidate & ease back to test the support at the 20-day SMA line at RM3.70. Its next support would be the horizontal line at RM3.50. If it ever comes close to RM3.50, I think it would be a good entry to this stock.
Hi Alex,
Thank you very much for your input . I remember DKSH sold some of its property in FY31/12/2012. If exclude this one time net profit, do you know what is the net EPS ?
Many thanks
Hi networking,
If you exclude the exceptional gain, then the EPS for QE31/12/2013 would be 13 sen. Full-year EPS would be about 52 sen. Thus, at a price of RM4.10 now, DKSH is trading at a PE of 7.9 times. It is relatively attractive. It may trade up to a PE of 10-12 times.
Hi Alex,
Million thanks. Will invest in DKSH for long term..
Many thanks
Hi Alex,
What do u think about Can-one ? The EPS for last year is RM1.12. Based on its current share price, it is only 2.39. As I know its food business is now earning much more than its packing business. Moving forward, do you think its food business can still sustain strong growth ?
Best regards
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