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Wednesday, March 01, 2017

DUFU: Earnings Soared

Background


Dufu Technology Corp. Berhad (“Dufu”) is an advanced one-stop manufacturing facility offering superior quality manufacturing, engineering capabilities and services. Its services also include finished components, modular or sub-modular fabrications and assemblies.

Historical Financial Performance

Dufu's improved financial performance over the past 3 years started out with "new product mix development with the HDD customers" coupled with "continuous growth from the Non-HDD sector such as Sensor and Control". Going forward, it expects "to sustain [its] HDD businesses which will to a certain extent mitigate the expected contraction".


Graph 1: Dufu's last 10 yearly result

Recent Financial Result

For QE31/12/2016, Dufu's net profit rose 166% q-o-q or 379% y-o-y to RM15 million while revenue was mixed- up 10% q-o-q but down 11% y-o-y to RM48 million. The improved profits were attributed to:

  • Depreciation of Ringgit Malaysia against USD.
  • Gain on dissolution of subsidiary amounting to RM3.71 million.
  • Reversal of receivable and inventories amounting to RM1.16 million and RM1.22 million respectively.
  • Continued improvement of production efficiency and effectiveness.
  • Improve in interest income in the quarter under review
If the one-off gain and reversals were excluded, the net profit would drop to RM9.1 million.
 


Table: Dufu's last 8 quarterly result


Graph 2: Dufu's last 14 quarterly result
 
Latest Financial Position

As at 31/12/2016, Dufu'd financial position is deemed satisfactory with current ratio at 3x and gearing ratio at 0.4x. It has net cash of RM38 million or 21.6 sen per share.

Valuation

Dufu (closed at RM0.87 yesterday) is now trading at a trailing PER of 5.5x (based on last 4 quarters' EPS of 15.82 sen). Excluding the one-off gain & reversals, the last 4 quarters' EPS would be 12.3 sen and the trailing PER would be 7.1x. At either PERs, Dufu looks attractive.

Technical Outlook

Dufu is in a strong uptrend line, S1-S1 with support at RM0.70. 


Chart: Dufu's monthly chart as at Feb 28, 2017(Source: ShareInvestor)

Conclusion

Based on good financial performance & position, attractive valuation & positive technical outlook, Dufu is a goios tock to consider for long-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.

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