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Thursday, November 12, 2015

Tienwah: Earning roared back

Result Update

For QE30/9/2015, Tienwah's net profit rose 166% q-o-q or 298% y-o-y to RM14.6 million while revenue rose by 11% q-o-q or 8% y-o-y to RM96 million. Tienwah's bottom-line roared back due to higher revenue, increased in the share of profits of an associate and lower depreciation charge. The latter was due to revision of the useful life of its plant & machinery which resulted in a RM3.2 million reduction in  the depreciation charge in the current quarter; of  which RM2.1million related to adjustments from 1 January 2015 to 30 June 2015.


Table: Tienwah's last 8 quarterly results

Below I present the chart of Tienwah's P&L & profit margins for the past 35 quarters. The 2 charts on the left are unadjusted while the 2 charts on the right are adjusted for changes in depreciation. You can see that the adjusted charts do not take away too much from what is a substantial improvement in Tienwah's performance, both top-line & bottom-line.


Chart 1: Tienwah's last 35 quarterly results

Valuation

Tienwah (closed at RM1.82 yesterday) is trading at a trailing PE of 7.6 times (based on the last 4 quarters' my projected EPS 23.8 sen). If the one-off improvement due to depreciation reduction (a result of change in useful life duration), the rolling EPS would drop to 21.0 sen & the trailing PER would rise to 8.7 times. At these multiples, Tienwah's valuation is deemed attractive.

Technical Outlook

As noted earlier, Tienwah has broken above its intermediate downtrend line, RR at RM1.70 about 2 weeks back (see Chart 2). With this breakout, Tienwah could well have found its bottom. Recovery may come if earning returned. It may have returned!


Chart 2: Tienwah's weekly chart as at Nov 11, 2015 (Source: Share Investors)

From the monthly chart below, we can see that the stock has rebounded after testing its long-term uptrend, SS.

 
Chart 3: Tienwah's monthly chart as at Nov 11, 2015 ((Source: Share Investors) 

Conclusion

Based on improved financial performance, attractive valuation & positive technical outlook, Tienwah is a good stock for long-term investment.

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, Tienwah.

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