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Tuesday, October 13, 2015

Canone: Still cannot?!

The share price of Canone has recovered from its recent low of RM2.00 to trade at around RM2.60. This compared less favorably to its Johotin which is in the same businesses of can manufacturing and production of condensed & evaporated milk. In addition, Canone may realize substantial gain from its investment in Kianjoo if it accepts the privatization offer at RM3.30 per share bring carried out by Aspire Insights Sdn Bhd. Can the share price catch up with Johotin?
 
Results Update

In QE30/6/2015, Canone's net profit soared 57% q-o-q or 76% y-o-y to RM24 million while revenue increased by 13% q-o-q but dropped 7% y-o-y to RM217 million. Canone's pre-tax profit jumped due to better PBT for its General Cans segment (increased by RM2.4 million from RM4.5 million); better PBT for its Food Products segment (increased by RM7.1 million to RM17.7million); and, higher contribution from Kian Joo Can factory Bhd (which increased by RM2.5 million to RM11.4 million).


Table: Canone's last 8 quarterly results


Chart 1: Canone's last 34 quarterly results

Valuation

Canone (closed at RM2.62 yesterday) is now trading at a PE of 5 times (based on last 4 quarters' adjusted EPS of 51 sen. At this PER, Canone is deemed very attractive.

Technical Outlook

Canone's share price is in a tentative intermediate downtrend line, SS with resistance at RM2.70. Immediate support is at RM2.20.


 Chart 2: Canone's daily chart as at Oct 12, 2015 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance, attractive valuation & potential windfall from a possible sale of its Kianjoo stake, Canone could be a good stock for trading BUY. However, its technical outlook is still negative until it manages to break above its intermediate downtrend line at RM2.70.

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, Canone.

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