TSH has a bullish breakout at RM1.45

Background

TSH is involved in 3 businesses i.e. palm & bio-integration; wood products manufacturing; and, cocoa & vegetable fats manufacturing. The wood products manufacturing is carried on by its 65%-owned subsidiary, Ekowood International Bhd. The latter is a public company listed on Bursa Malaysia.

Recent Financial Results

TSH's financial results has shown some recovery in the last 2 quarters (i.e. QE Sep 30, 2006 & QE Jun 30, 2006) after its net profit was eroded in the preceding 2 quarters (i.e. QE Mar 31, 2006 & QE Dec 31, 2005) by the decline in crude palm oil price and the lower margin of the wood and cocoa business segments. Its net profit increased by 36.4% y-o-y to RM12.2 mil on the back of a 9.6%-increase in turnover. When compared to the immediately preceding quarter, TSH's net profit has dropped by 9.8% while turnover was 4.3% lower.



Valuation

Based on its last 4 quarters' cumulative EPS of 9.29 sen & its closing price of RM1.53 today (December 28), TSH is trading at a PE of 16.5 times. At this PE, one can say that TSH is trading at its fair value. Nonetheless, we notice that TSH's main businesses have shown steady improvement of late, which will translate to btter margin for TSH going forward. As such, it is likely that its EPS for FY2007 will be higher.

Technical Outlook

TSH has broken above its downtrend line in the w/e Sep 22 at the RM1.40 level. Since then, the share has been trading in range between RM1.15 & 1.45. On December 27, TSH has broken above this range. This could signal the beginning of an upside move for TSH.

Chart: TSH's weekly chart as at December 27

Conclusion

Based on good technical set-up & improving business outlook, TSH could be a good stock for medium investment.