ENG's profit & sale improved further

Background

Eng Technologi Holdings Bhd ('ENG') is involved in the manufacture of hard drive. The company, which grew on the back of rapid expansion of global demand for data storage, suffered serious setback in 2007 when it lost one of its major customers in China. The results for the past 3 quarters indicate that ENG may have finally rebounded from that setback.

Recent Financial Results

ENG has announced its results for 1Q2008 ending 31/3/2008. Its net profit dropped 12.4% q-o-q from RM12.7 million to RM11.2 million while turnover increased 5.8% from RM150.4 million to RM159.1 million. The lower net profit was attributable to higher effective tax rate for QE31/3/2008, which in turn was due to different tax treatment accorded to incomes in different countries. Nevertheless, it is noted that its pre-tax profit has increased for the same periods from RM14.9 million to RM17.8 million.



Valuation

If ENG can maintain its profitability as reported in the last 2 quarters, the it may achieve a full year EPS of 40 sen. As at yesterday's close of RM1.55, ENG is trading at a forward PE fg 3.9 times. Its P/Book is at 0.9 times (based on NTA per share of RM1.68 as at 31/3/2008).

Others

ENG had earlier proposed a First & Final Dividend of 9 sen (tax exempt) which will go 'ex' on June 5th. This gives the share a decent dividend yield of 5.8%.

Technical Outlook

The weekly chart shows that ENG may have broken to the upside of its medium-term downtrend line at RM1.50. The stock has a good horizontal support at RM1.50 & RM1.25.


Chart: ENGs weekly chart as at May 21, 2008 (source: Quickcharts)

Conclusion

Based on improving performance, attractive valuation & bullish technical outlook, ENG is a good investment for medium-term.