Tasek: Solid Performance!

Background

Tasek Corporation Bhd ('Tasek') manufactures ordinary portland cement and masonry cement which are sold in bulk or in 5-kg bags. It has a cement plant with annual capacity of 2.3 million MT located in Tasek Industrial Estate in Ipoh. In addition, Tasek also has a ready-mixed concrete division.

For 1H2014, cement & concrete divisions accounted for 76% & 23% of its revenue, respectively. All the operating profit of the group came from the cement division, while concrete & other divisions incurred small losses.

Recent Financial Results

We can see below that Tasek's revenue has been rising steadily in the past 6 quarters. With profit margin relatively stable, the rising revenue translates into rising profit.


Table: Tasek's last 8 quarterly results

 
Chart 1: Tasek's last 25 quarterly results 

High Dividend Payout

Tasek pays out high dividend last year, totaling 152 sen (see Chart 2). From Chart 3, we can see that Tasek's strong operating cashflow allowed the company to pay the high dividend while at the same time, keeping about cash holding at an adequate level of RM20-30 million.

 
 Chart 2: Tasek's DPS for last 25 quarterly results 


Chart 3: Tasek's last 10 years' cashflow & cash holding
 
Valuation

Tasek (closed at RM14.90 yesterday) is now trading a PE of 16.7 times (based on last 4 quarters' EPS of 89 sen). At this PE multiple, Tasek is deemed fairly valued. However, for investors who are looking for a good income stock, Tasek can be considered as it has a dividend yield of about 8% (based on FY13 DPS of 122 sen, excluding special dividend of 30 sen.

Technical Outlook

Tasek is in a long term uptrend. It has been consolidating in a reverse pennant formation. An upside breakout at RM16 could signal the continuation of the prior uptrend.


Chart 4: Tasek's weekly chart as at Aug 5, 2014 (Source: Tradesignum)

Conclusion

Based on good financial performance, attractive dividend yield and mildly positive technical outlook, Tasek is rated a HOLD. Tasek is a good stock to consider for investors looking for an income stock.

Note: 
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, Tasek.