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Friday, May 20, 2016

Tekseng: Powered by Solar

Background

Tekseng is a polyvinyl chloride (PVC) product and photovoltaic solar manufacturer. It has ventured into the production of solar panel. This new segment has overtaken its traditional PVC business and become its main revenue & profit generator.  See the change in diagram in revenue & profits from 1Q2015 to 1Q2016 below:


Diagram: Tekseng's segmental performance in 1Q2016 7 1Q2015

The group is now increasing its production capacity further. According to the Star newspaper report dated Feb 15, 2016 (here); the increased production capacity will be as follows:

  • It will spend RM237mil on its existing premise this year to add five more production lines to its existing four production lines 
  • This will increase the production capacity from 270 MW to 740MW by the third quarter
  • The increased production capacity is equivalent to about 156 million pieces of cell, valued at around US$250mil in today’s market.
  • The contribution of the solar panel business to 60% to 70% of the group’s revenue for 2016
Historical Financial Performance

In 2015, Tekseng's revenue & profits had risen substantially due to the contribution from the Solar division.


Chart 1: Tekseng's last 10 yearly results

Recent Financial Performance

QE31/12/2015 was the first time its revenue surpassed the RM100 million mark. Revenue rose again in QE31/3/2016 to RM131 million. In QE31/12/2015, its PBT surpassed the high of RM12.6 million in QE30/6/2014. Again, the recent quarter saw further increase in PBT to RM26.6 million.


Table 1: Tekseng's last 11 quarterly results


Chart 2: Tekseng's last 11 quarterly results

Financial Position

As at 31/3/2016, Tekseng's financial position is deemed satisfactory. Its current ratio stood at 1.57x while total liabilities to equity stood at 0.41x.

Valuation

Tekseng (closed at RM1.32 yesterday) is now trading at a trailing PER of 10.4x (based on last 4 quarters' EPS of 12.75 sen). Based on its rapid growth, Tekseng's PER is deemed low- making the stock fairly attractive.

Technical Outlook

Tekseng has risen quite substantially over the past 2 years, from a low of RM0.30 in 2014 to a recent high of RM1.40.


Chart 3: Tekseng's monthly chart as at May 19, 2016 (Source: ShareInvestor.com)

Recently, Tekseng has surpassed its high of RM1.30 in early January this year. This breakout is confirmed by MACD crossing above the MACd signal line and ADX hooking upward. It seems like Tekseng will continue with its prior uptrend.


Chart 4: Tekseng's weekly chart as at May 19, 2016 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance, attractive valuation and bullish technical outlook, Tekseng 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, Tekseng.

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