FRONTKN: Strong Earnings Continued

Background

Frontken Corp Bhd ("Frontkn") is involved in the provision of surface and mechanical engineering solutions for industries such as Oil & Gas, Power generation and Marine. For more on its services, go here.

Historical Financial Performance

The past 12 years P&L shows Frontkn's top-line and bottom-line have been on a steady uptrend.

Graph 1: Frontkn's last 12 yearly results

Latest Financial Performance

For QE30/6/2018, Frontkn's net profit rose 92% q-o-q or 107% y-o-y to RM12 million while revenue rose 15% q-o-q or 16% y-o-y to RM82 million. Revenue rose q-o-q due to improved business performance for the Group’s subsidiary in Taiwan, Malaysia, Singapore and the Philippines. PBT soared mainly due to higher revenue and foreign exchange gain as compared to foreign exchange loss in the immediate preceding quarter.


 Table: Frontkn's last 8 quarterly results


Graph 2: Frontkn's last 25 quarterly results

Financial Position

As at 30/6/2018, Frontkn's financial positon is deemed healthy with current ratio at 2.6 times and gearing ratio at 0.34 times. It has net cash in hand totaling RM105 million (or, RM0.08 per share).

Valuation

Frontkn (closed at RM0.64 yesterday) is trading at a trailing PER of 18 times (based on last 4 quarters' EPS of 3.55 sen). At this PER, Frontkn is deemed fully valued.

Technical Outlook

Frontkn broke above the high of RM0.52 recorded in January this year. It may potentially hit a high of RM0.67-0.70 based on 1-to-1 extension.


Chart 1: Frontkn's weekly chart as at Aug 7, 2018 (Source: Shareinvestor.com)

Frontkn's uptrend is very sharp, rising from RM0.13 in 2016 to the current price of RM0.64. All exponential rallies are beautiful events- until pullback set in. Then they would leave a bloody trail. Be careful.


Chart 2: Frontkn's monthly chart as at Aug 7, 2018 (Source: Shareinvestor.com)

Conclusion

Based on good financial performance & healthy financial position and positive technical outlook, Frontkn can be a good stock for long-term investment. As always, you should consider buying only when the price weakness.

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.