Wednesday, November 21, 2012

Harison- bottom-line continued to drop

Results Update

For QE30/9/2012, Harison's net profit dropped by 29% q-o-q or 33% y-o-y to RM5.6 million while revenue was mixed; dropped marginally by 2% q-o-q but rose 11% y-o-y to RM343 million. The increase in revenue was attributed to sales of fast consumer products, such as Coca-cola & F&N Diaries. Despite the increased revenue, profit margin erosion persisted and this dragged down bottom-line for the company.

Table: Harison's last 8 quarterly results

Chart 1: Harison's last 26 quarterly results

Material Litigation

As you may be aware, Harison was sued by the Custom for Import Duty, Excise Duty & Sales Tax totaling RM91.75 million (here). In September, Harison received  a 14-day notice to settle alleged unpaid duties and sales tax or face legal action.A further extension of 3-week was granted by Custom & there was no further announcement on this subject.


Harison (closed at RM2.90 yesterday) is now trading at a PE of 6.7 times (based on last 4 quarters' EPS of 43 sen). The low PE multiple reflects the market's concern for the continued slide in the earning.

Technical Outlook

Harison seems to have made a top and it is now moving sideway. Its strong support is at RM2.85 while its immediate resistance is the psychological RM3.00 mark. My concern is a possible break below the RM2.85 support, which could send the stock into a downtrend.

Chart 2: Harison's weekly chart as at Nov 21, 2012_3pm (Source: Quickcharts)


Based on weaker financial performance and serious litigation problem, Harison is a stock to be avoided. I will revise my call if there is a favorable resolution of the litigation issue and/or a reversal of the declining profit margin.

In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Harison.

No comments: