Wednesday, December 19, 2007

TSM surprised with 2 quarters of good profit

One of the first companies that I have posted a BUY call was a company called Juan Kuang (go here & here). It is an auto parts manufacturer, which has been affected by the slowdown in the auto sector. The company has recently changed its name to TSM Global Bhd ('TSM'). You can see from the first table that TSM's financial performance has been pretty steady despite the contraction experienced by the industry.

Its latest quarterly results for QE31/10/2007 shows that its net profit has increased 23.7% q-o-q or 286% y-o-y to RM6.8 million (see the table below). While its turnover has increased by 12.4% y-o-y to RM54.5 million, it actually dropped by 14.4% when compared to the preceding quarter's number. The better profit was attributable to new business for new models such as Perodua Viva, Nissan Latio & Toyota Vios. TSM has benefited from an extraordinary gain from the sale of an investment of RM1.57 million for QE31/10/2007. If this were excluded, TSM's net profit for QE31/10/2007 would be about RM5.21 million. This means that its net profit would be lower by 5% as compared to the net profit for QE31/7/2007.

If TSM can maintain its current profitability, it might report an earning of 35 sen for the FY2008, or 40 sen for FY2009. At yesterday's closing price of RM1.12, TSM is trading at a trailing PE of 3.2 times (or, a forward PE of 2.8 times).

From chart, you can see that TSM has been range-bounced for the past 2 & 1/2 year between RM0.94 & RM1.54. The psychological RM1.00 horizontal support is currently supporting the share price. Technically speaking, TSM has yet to show any bullish sign that has attracted a BUY call.

Chart: TSM's weekly chart as at December 18 (courtesy of Quickcharts)

TSM is an attractive stock trading at a cheap PE multiple of about 3 times. I rate TSM as a long-term BUY because its technical picture has yet to turn bullish.

(I have subsequently amended a small portion of the post. The amended portion is shown in bold, italicized lettering.)

No comments: