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Monday, July 23, 2018

LIIHEN: Attractive Furniture Stock

Recent Financial Result

In QE31/3/2018, Liihen's net profit dropped 47% q-o-q or 63% y-o-y to RM8.1 million while revenue rose 4.8% q-o-q or 12.0% y-o-y to RM194 million. Revenue in term of USD grew 12% from USD 42 million of the immediate preceding quarter to USD 47 million but recorded only 5% increase in RM term due to the depreciation of USD by 6%. (1st Qtr 2018 :3.90; 4th Qtr 2017: 4.15) Regardless of the lower administration expenses as compared to immediate preceding quarter, the Group’s profit before tax down by 31% mainly due to increase in raw materials cost and lower USD conversion rate in the current quarter. With the USD strengthening in the past 3 months, Liihen's profits for QE30/6/2018 may enjoy a boost. [Note: Liihen's result for QE31/3/2018 was released on May 24, 2018.]


Table: Liihen's last 8 quarterly results


Graph: Liihen's last 22 quarterly results

Financial Position

As at 31/3/2018, Liihen's financial position is deemed healthy with current ratio at 2.2 times and total liabilities to total equity of 0.47 times. It has net cash of RM85.7 million or RM0.476 per share).

Valuation

Liihen (closed at RM2.84 at the end of the morning) is now trading at a trailing PER of 8.6 times (based on last 4 quarters' EPS of 33.1 sen). If the net cash is deducted from the share price, then the trailing PER would be lowered to 7.1 times. It paid total dividend of 18.5 sen last 4 quarters, which gives a dividend yield of 6.5%. The PER and DY numbers show Liihen to be an attractive stock.

Technical Outlook

Liihen has been in an intermediate downtrend from November last year. It could have broken above that downtrend line at RM2.75.


Chart 1: Liihen's daily chart as at July 23, 2018_12.30am (Source: Shareinvestor.com)

Liihen is still in a long-term uptrend line, with support at RM2.20.


Chart 2: Liihen's monthly chart as at July 23, 2018_12.30am (Source: Shareinvestor.com)

Conclusion

Despite weaker financial performance, Liihen is a good stock for long-term investment based on its healthy financial position, attractive valuation & bullish technical outlook.

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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