Friday, November 18, 2016

Orient: Back To The Black

Results Update

For QE30/9/2016, Orient's net profit dropped 6% y-o-y to RM89 million on the back of a 15%-increase in revenue to RM1376 million. It has recovered from a net loss of RM12.6 million recorded in the immediate preceding quarter (QE30/6/2016) on the back of a 27%-increase in revenue.

Table 1: Orient's last 8 quarterly results

From the segmental table below, we can see that the loss in QE30/6/2016 & the recovery in the latest quarter, was due to the downturn & subsequent recovery in the automotive & plantation divisions. The changes are explained below:

  • Revenue from automotive segment grew by 46.3% to RM 1,069.5 million and recorded higher operating profit by 121.2% to RM 55.8 million (Q2FY16: RM 25.3 million). Revenue for retail operating increased by 51.0% mainly due to higher number of cars sold particularly from newly launched of Honda Civic during this quarter. Higher operating profit recorded in line with higher revenue.
  • Revenue from plantation segment decreased by 20.3% (Q3FY16 : RM 85.4 million; Q2FY16 : RM 107.2 million) but recorded operating profit of RM 13.0 million (operating loss in Q2FY16 : RM 74.9 million). Due to El Nino effect on FFB yields, CPO and PK sales volume from Indonesian operations declined by 27.8% and 21.7% respectively as compared to Q2FY16. The segment managed to registered an operating profit due to lower foreign exchange loss for the JPY borrowings (weakened IDR against JPY (September16 : 0.1% ; June16 : 10.0%).

Table 2: Orient's segmental results compared

Graph 1: Orient's last 44 quarterly results


Orient (closed at RM6.81 at the end of the morning session) is now trading at a PE of 21 times (based on last 4 quarters' EPS of 32 sen). At this PER, Orient is deemed overvalued.

Technical Outlook

Orient has pulled back to its long-term uptrend curve-linear line with support at around RM6.50.

Chart 1: Orient's monthly chart as at Nov 18, 2016_12.30 (Source:

Chart 2: Orient's weekly chart as at Nov 18, 2016_12.30 (Source:


Based on return to profitability, Orient is deemed a good stock for a recovery play.

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.


Heng said...

hi Alex,
Good day!

What is your view on MSC (5916) with current price RM 3.90 as at 21 Nov 2016?
Please advice.


Alex Lu said...

Hi Heng,

MSC is moving higher in line with tin prices. Tin prices broke above the downtrend line at USD18000 per MT in July. Tin is now trading at USD21500. The immediate resistance is at USD22000. The strong resistance will come from USD25000, which was the peak in 2008. Tin made a higher peak in USD33500 in 2011.

Despite the good price in tin, MSC's earning remained flattish. Thus I am inclined to recommend SELLING INTO STRENGTH for MSC from now to RM5.00. (Note: The stock peaked at RM5.00 in 2011. This was lower than its 2008 peak of RM9.50.)