BLD Plantation had a breakout and a new high

Background

BLD Plantation ("BLD") is a Sarawak-based oil palm company. It has 53,000 hectares of plantation land; of which 24,700 hectares had been planted with oil palm. 10,000 hectares of the planted area are matured.

Recent Financial Results

BLD's latest 4 quarters' cumulative net profit amounted to RM14.0 mil, representing a drop of 50.4% as compared to the preceding 4 quarters. This is despite a 11.8%-increase in turnover from RM122.6 mil to RM137.0 mil. The poorer results was attributed to lower prices of CPO and increased operating cost. Also, it is noted that BLD's net profit for the earlier period has been boosted by a tax credit of RM3.1 mil in QE31/12/05.



Valuation

Based on the latest 4 quarterly EPS of 16.5 sen & the price of RM2.92 as at 3.30 p.m. today, BLD is trading at a PE of 17.7 times. Given the recovery in the prices of CPO in the past few months that may be reflected soon in its financial result, BLD's EPS & PE should subsequently improve.

Technical Outlook

BLD did a breakout above the strong horizontal resistance of RM2.50 on the last day of 2006. This level is also the recent high for the stock. A break above a recent high is normally a very bullish event & I expect the stock to rise further. Admittedly, the current price is lot higher than the breakout level, which makes buying difficult as the reward & risk may not be in your favor. If so, you may want to wait for the stock to pull back a bit before making an entry.

Chart 1: BLD's daily chart as at Dec 29, 2006


Chart 2: BLD's weekly chart as at Dec 29, 2006

Conclusion

Based on good technical outlook & improving fundamental, I believe BLD would be a good buy for the medium-term. However, you may want to wait for the price to ease back a bit before making an entry.