Thursday, March 01, 2012

Kianjoo- bottom-line affected by higher raw material costs

Results Update

Kianjoo has announced its results for QE31/12/2011. Its net profit dropped by 47% q-o-q or 35% y-o-y to RM15 million while turnover increased by 6% q-o-q or 5% y-o-y to RM292 million. The y-o-y decline in its bottom-line was attributed to a 25%-decline in pre-tax profit from the Can division which resulted from higher raw material costs & increased commodity derivatives contract losses. The decline on q-o-q basis was due to higher raw material costs & accrual of staff performance incentives.

Table: Kianjoo's last 8 quarterly results

Chart 1: Kianjoo's last 23 quarterly results

Comparison with Canone's results

The poorer results for Kianjoo - confined mainly to poorer results for its Can division - should be contrast against the better results from Canone, which came mainly from better performance for the latter's Can division. Has the management of Kianjoo relaxed their tight cost management, leading to a drop in its profit margin?


Kianjoo (closed at RM2.20 yesterday) is now trading at a PE of 9.3 times (based on last 4 quarters' EPS of 23.6 sen). At that PE multiple, Kianjoo is deemed attractive.

Technical Outlook

Kianjoo is in an uptrend line with support at RM2.10. Its immediate resistance is at RM2.20.

Chart 2: Kianjoo's daily chart as at Mar 1, 2012_12.00pm (Source: Quickcharts)


Based on satisfactory, albeit poorer financial performance; attractive valuation; and positive technical outlook, Kianjoo is still rated a good stock for long-term investment.

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