TWS- a poor all-round performance

Results Update

For QE31/12/2011, TWS's net profit dropped by 16% q-o-q or 37$ y-o-y to RM122 million while its turnover increased by 36% q-o-q or 46% y-o-y to RM2.28 billion. The pre-tax profit from the three main divisions declined- Rice from RM53 million to RM40 million; Plantation from RM144 million to RM139 million; and, Sugar from RM91 million to RM81 million. The decline in pre-tax profit was due to the following reasons:

- Rice division experienced higher Selling & Marketing expenses
- Plantation division experienced lower CPO prices & higher manuring cost
- Sugar division experienced increased production cost & other operating costs.

Table: TWS's last 8 quarterly results



Chart 1: TWS's last 14 quarterly results



Chart 2: TWS's profit margin for last 14 quarterly results

Valuation

TWS (closed at RM9.89 today) is now trading at a PE of 6.1 times (based on the last 4 quarters' EPS of 162.70 sen). At this PE multiple, TWS is deemed undemanding.

Technical Outlook

TWS is in an uptrend line, with support at RM10.00. It may have broken below this uptrend line today. If there is no recovery tomorrow or the next few days, TWS could continue to slide to test its immediate support at the horizontal line at RM9.00.


Chart 3: TWS's weekly chart as at Feb 27, 2012 (Source: Tradesignum)

Conclusion

Based on attractive valuation, TWS is still a good stock for long-term investment. The stock has however just broken below its uptrend line. We should wait & see whether it can recover above the RM10.00 mark. If not, it may slide to the next support at RM9.00, which could be a good entry to this consumer stable stock.