Muda's uptrend may have started

Background

Muda Holdings Bhd ('Muda') is involved in paper milling & paper packaging. It pioneered the paper & paper packaging industry in Malaysia.

Recent Financial Results

For QE31/12/2007, Muda's turnover increased by 11.0% q-o-q or 24.6% y-o-y to RM202 million. As a result of the increased turnover, Muda reported a net profit of RM9.1 million, representing a 209%-jump over the immediate preceding quarter's net profit of RM2.9 million as well as a turnaround from a loss of RM20.9 million incurred in the same quarter last year. The company attributed the improved performance to higher demand & upward trend in products selling price.



Valuation

If Muda (closed at RM0.505 as at 28/4/2008) can maintain its net profit similar to QE31/12/2007, it might record an EPS of 12 sen for FY2008. Based on this earning assumption, Muda is now trading at a forward PE of 3.9 times. As such, Muda is trading at an attractive multiple.

Technical Outlook

Muda has been trending lower since making a high of RM2.53 in January 1994. It made a low of RM0.285 in January 2006 and immediately thereafter rebounded to break above the long-term downtrend line. Despite the breakout, the share price has been trapped in a range of RM0.30 & RM0.48 for the next 2 years. See Chart 1 below.


Chart 1: Muda's monthly chart as at April 28, 2008 (courtesy of Quickcharts)

On March 31st, Muda begun another upleg. With good volume, the share price surpassed the RM0.48 level on April 16th. That breakout failed to sustain & the share price dropped back into the range again. Yesterday, the share price again surpassed the RM0.48 level as well as the psychological RM0.50 level (see Chart 2 below). As at 4.00 pm today, the share price is still firming upward & was trading at RM0.53. I believe that Muda could starting on its uptrend now. The immediate resistance is at RM0.60 and thereafter at RM0.80.


Chart 2: Muda's daily chart as at April 28, 2008 (courtesy of Quickcharts)

Conclusion

Based on improved performance & technical breakout, Muda could be a good BUY for medium-term.