United Malacca Bhd ('UMcca') is involved mainly in the cultivation of oil palm & palm oil milling. In addition, it has a 20.9%-stake in another listed company, Pacificmas Bhd ('Pacmas') as well as a 25%-stake in a tile-maker, Niro Ceramic (M) Sdn Bhd. Pacmas is involved in the underwriting of general insurance; unit trust & asset management; leasing & hire purchase; property investment; and, investment holding.
As at the end of FYE2006, UMcca has a land bank of 4,251 acres; comprising 20,263 cres of matured trees and 3,988 acres of immatured palms.
Recent Financial Results
UMcca has just reported its results for QE31/1/2007. For that quarter, its net profit jumped by 61.1% q-o-q or 439% y-o-y to RM20.1 million while its turnover increased by 11.3% q-o-q or 44.2% y-o-y to RM38.7 million. The sharply higher net profit is attributable to an investment gain of RM6.8 million as well as better CPO prices.
When comparing the last 4 quarters' results with the preceding 4 quarters, we can see that UMcca's net profit has jumped 42% from RM31.7 million to RM45.0 million on the back of a 8.6%-increase in turnover form RM113.5 million to RM123.2 million.
Valuation
If UMcca can repeat its performance of the last 4 quarters (but excluding the investment gain of RM6.8 million), it may report a full-year EPS of 29 sen. Based on the closing price for the morning session of RM5.05 (for March 27), UMcca is now trading at a PE of 17.4 times. Fundamentally, this stock is fairly valued.
Technical Outlook
UMcca's share price appears to be in an uptrend line, with support at RM4.54/56 level.
Chart: UMcca's daily chart as at March 26, 2007
Conclusion
As the stock is fairly valued, the only opportunity is to buy when the stock pulls back to its uptrend line support at RM4.54/56. The reward is however not too terrific; maybe a 15-20% gain.
What about KULIM? It's not a laggard but there is still value in it. Would you think it's a good time to enter KULIM-wa since it's currently trading at a discount to its mother share.
ReplyDeleteI have to say that I do not track Kulim. I have a quick look at Kulim & this is my take on Kulim:
ReplyDelete1. Its unaudited net profit for FY2006 is about RM128.1 mil. This includes an exceptional profit from the sale of its Sumatra subsidiaries totaling RM28.8 mil. If we exclude this item, its net profit will come to RM99.3 mil; giving a full-year basic EPS of 36 sen. At yesterday's closing price of RM6.95, it is trading at a PE of 19.3 times. I consider this to be fully-valued.
2. Chartwise, Kulim appears to have broken out of its triangle pattern on the upside. With this, Kulim's short-term outlook is bullish. On weakness, it may pull back to its short-term uptrend line support at RM6.40/50. Its long-term uptrend line support is however at RM5.50/60.
3. I view the discount in Kulim-WA's price warily. The discount, which has appeared since Nov 2006, could mean that the underlying share is at or near its peak, based on the prevailing market conditions. If not, insiders & smart moneys would not allow a profitable opportunity like this to persist. Imagine buying the warrant at RM4.18 (the closing price as at Mar 27); paying the exercise price of RM2.43 to convert the warrant into share; and, then selling the share near the price of RM6.95 (the closing price as at Mar 27); thus making a profit of RM0.34 each. Why is it not happening? The insiders & smart moneys are not too sure that the share price can hold up during the duration of the conversion process.
Thank you, Alex. Appreciate it very much. I think your reasoning on KULIM-wa does make a lot of sense as warrants are a forward looking indicator for the mother shares.
ReplyDelete