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Monday, May 23, 2016

Liihen: An Attractive Growth Stock

Background

Lii Hen Industries Bhd ('Liihen') is involved in the manufacture of furniture, and processing and kiln drying of rubber wood and timber. For the company profile, go here.

Recent Financial Performance

Liihen's revenue has been trending higher for the past 3 years. In QE31/3/2016, revenue hit a high of RM165 million.

Its net profit has been making new high for the past 5 quarters. In QE31/3/2016, the company recorded a net profit of RM21 million.


Table: Liihen's last 14 quarterly results


Chart 1: Liihen's last 14 quarterly results

Financial Position

As at 31/3/2016, Liihen's financial position is deemed very healthy with current ratio at 2.6X and total liabilities to equity of 0.4X. The company has net cash of RM82 million or 45 sen per share.

Valuation

Liihen (closed at RM2.51 last Friday) is now trading at a trailing PER of 6.7X (based on last 4 quarters' EPS of 37.48 sen). If the net cash is deducted from the share price, then the trailing PER would be lowered to 5.5X. It paid total dividend of 16.5 sen last year (including a special dividend of 6 sen). That gives a dividend yield of 6.6% (or 4.2% after excluding the special dividend). The PER & DY numbers show Liihen to be an attractive stock.

Technical Outlook

Liihen has been in an intermediate downtrend from November last year to March this year. The stock has broken above its downtrend and is now poised to continue its uptrend. A break above the horizontal line of RM2.55 could signal the start of this uptrend continuation.


Chart 2: Liihen's weekly chart as at May 20, 2016 (Source: Shareinvestor.com)


Chart 3: Liihen's daily chart as at May 20, 2016 (Source: Shareinvestor.com)

Conclusion

Based on good financial performance, healthy financial position, attractive valuation & bullish technical outlook, Liihen is a good stock to consider 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, Liihen.

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