Hupseng: Earnings Didn't Disappoint In Seasonally Strong 4Q

Result Update

For QE31/12/2016, Hupseng's net profit rose by 55% q-o-q to RM15.4 million while revenue increased by 28% q-o-q to RM83 million. Profit before tax rose q-o-q due to significant sales volume recorded in the domestic market. Compared to the corresponding quarter last year, net profit was practically unchanged while revenue rose 3%.

  
Table: Hupseng's last 8 quarters result


Graph: Hupseng's last 38 quarters' P&L  

Valuation

Hupseng (closed at RM1.18 yesterday) is now trading at a PER of 19 times (based on last 4 quarters' EPS of 6.17 sen). Hupseng has cash balances of RM105.7 million as at 31/12/2016. This translates to cash per share of RM0.13. If the cash in hand is deducted from the share price, the PER would be lowered to 17 times. At this PER, Hupseng is deemed fairly valued.

Technical Outlook

Hupseng nearly tested its long-term uptrend line support at RM1.15.
 

Chart: Hupseng's weekly chart as at Feb 14, 2017 (Source: MalaysiaStock.Biz)

Conclusion

Based on good financial performance, healthy financial position & positive technical outlook, Hupseng is a good stock 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.

Hupseng: Eat Your Biscuits!

Background

Hup Seng Industries Bhd ('Hupseng') is involved in the manufacture and sales of biscuits, confectioneries & other foodstuffs.

Recent Financial Performance

For QE31/12/2015, Hupseng's net profit rose by 33% q-o-q or 22% y-o-y to RM15.4 million while revenue increased by 24% q-o-q or 9% y-o-y to RM80 million. The improved performance was attributed to higher biscuits sales in domestic and export market.

 
Table: Hupseng's last 8 quarters result

Historical Financial Performance

Hupseng's top-line and bottom-line as well as its profit margins have been in a slow & steady rise for the past 8-9 years.


Chart 1: Hupseng's last 8 quarters' P&L  

Financial Position

Hupseng's financial position as at 31/12/2015 is deemed healthy with current ratio at 2.5 times while total liabilities to total equity stood at 0.5 time. The company has no borrowing. Instead it has cash of RM120 million or RM0.15 per share.

Valuation

Hupseng (closed at RM1.32 yesterday) is now trading at a PER of 19 times (based on last 4 quarters' EPS of 6.84 sen). If the cash in hand is deducted from the share price, the PER would be lowered to 17 times. At this PER, Hupseng is deemed fairly valued.

Last year, Hupseng paid out dividend totaling 4.5 sen in 3 tranches. So far, it hd paid out dividend totaling 4 sen in 2 tranches this year. If it pays out a final dividend of 2 sen (equal to each one of the last 2 tranches), then Hupseng's DY would be a decent 4.5%.

Technical Outlook

Hupseng is in an intermediate uptrend line, with support at RM1.25. That uptrend line stretches back all the way to 2008 when it was trading at a low of RM0.05!! Since it has come a long way, the market is waiting for a compelling fundamental reason to buy into the stock. In the absence of a compelling reason to sell, the share price would likely to keep drifting higher.


Chart 2: Hupseng's weekly chart as at Feb 18, 2016 (Source: ShareInvestor.com)

 
Chart 3: Hupseng's monthly chart as at Feb 18, 2016 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance, healthy financial position & positive technical outlook, Hupseng is a good stock for long-term investment. Good entry to the stock is when the share price drifts down to the uptrend line, currently at RM1.25.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Hupseng.