Oriental Holdings Bhd ('Orient') is well-known for its automotive business. The other businesses of the group may attract more attention soon. Of these other businesses, plantation has now gained more prominent due to the sharp jump in profit contribution in the past few quarters. I have tabulated below the revenue & pre-tax profit contribution from the main business segments of Orient. As you can see, Orient's plantation division has a pre-tax profit equivalent to some medium-size plantation companies listed on the exchange, such Hap Seng Plantation Holdings Bhd or Sarawak Plantation Bhd.
Recent Financial Results
In QE30/9/2007, Orient's net profit has increased by 23.6% q-o-q to RM104.6 million while turnover has gained 14.1% to RM1.2 billion. Net profit has however declined by 15.0% y-o-y from RM123.0 million, despite a 20.4%-jump in turnover. The lower net profit is attributable to lower effective tax rate enjoyed in QE30/9/2006.
Valuation
Based on yesterday's closing price of RM5.90, Orient is now trading at a trailing PE of 9.4 times (using the last 4 quarters' EPS of 62.87 sen). Its Price to Book is at 0.9 times (using its NTA per share of RM6.34 as at 30/9/2007). The stock has an acceptable dividend yield of 3.9% (which is better than FD rates).
Technical Outlook
The share price of Orient has risen from a low of RM4.00 in November 2006 to hit a high of RM7.45 in July last year. Since then, the share price has corrected back to its medium-term uptrend line support, at RM5.80-6.00.
Chart: Orient's weekly chart as at February 4, 2008 (courtesy of Quickcharts)
Conclusion
Based on attractive valuation & good technical set-up, I believe Orient is a good BUY for the medium-term. A catalyst for a revaluation of Orient may be a spin-off of its plantation division (like the listing of Hap Seng Plantation Holdings Bhd by Hap Seng Consolidated Bhd) or a strong pick-up in the automotive sector (which is quite likely to happen this year).
No comments:
Post a Comment