Kimlun: Good Results, Bullish Breakout

 Results Update

For QE30/6/2016, Kimlun’s net profit rose 41% q-o-q or 55% y-o-y to RM24 million while revenue was rose 5% q-o-q but dropped 5% y-o-y to RM246 million.

Revenue increased q-o-q due to higher revenue achieved by the manufacturing and trading division, which was in turn due to higher volume of sales of industrial building components to RAPID related projects. PBT rose q-o-q due to higher gross profit ( as a result of higher revenue & better gross profit margin of 16.4% as compared to 15.3% in QE31/3/2016); forex gain of RM2.12 million (as compared to a forex loss of RM3.21 million in QE31/3/2016) and increase of carriage outward of RM0.84 million (due to higher business volume). [Note: Kimlun's result for QE30/6/2016 was announced on August 29, 2016.]


Table: Kimlun's last 8 quarters' P&L accounts


Chart 1: Kimlun's last 14 quarters' revenue, profits & profit margins

Valuation

Kimlun (trading at RM2.04 as at 12:00pm) is now trading at a PER of 7.6 times (based on last 4 quarters’ EPS of 27 sen). At this PER, Kimlun is deemed fairly attractive.

Technical Outlook

Kimlun has broken to the upside of a pennant formation, ABCD at RM1.95 yesterday. Today it went above the psychological RM2.00 mark. Collectively, these breakouts suggest that Kimlun is continuing on its prior uptrend.


Chart 2: Kimlun's weekly chart as at Sep 6, 2016_11.15am (Source: ShareInvestor.com)
 
If we look at the monthly chart, we can see that the next resistance would be at the June 2013 high of RM2.05. Failure to break above this level could bring forth correction/consolidation at the RM2.00 mark. However, a break below the RM1.95 could convert this bullish breakout into a bull trap. In such a tricky situation, you should set a protective stop, say at RM1.90 (i.e. 5 sen below the breakout of RM1.95) to bale out in case the breakout turns into a trap.


Chart 3: Kimlun's monthly chart as at Sep 6, 2016_11.15am (Source: ShareInvestor.com)

Conclusion

Based on good financial performance, fair valuation & positive technical outlook, Kimlun could be a good stock for medium-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.