Thursday, November 27, 2008

Harison's net profit eased off somewhat

Harison has just announced its results for 3Q2008 ended 30/9/2008. Its bet profit dropped 12.1% q-o-q to RM6.7 million on a 4.2%-decline in turnover to RM261 million. Nevertheless, Harison's net profit increased by 66.5% from that of the previous corresponding quarter, while turnover was 6.4% higher for the same period.



In August 2008, Bumi Raya International Holding Company Ltd ('BRI') made an conditional offer to acquire all the shares of Harison at RM1.20 per share, which was subsequently revised to RM1.45 per share. Even after this revision, BRI was only able to increase its shareholdings from about 26% to 46.5%. As the acceptance rate fell short, the takeover was aborted (go here for the Bursa announcement). The low acceptance rate was somewhat surprising since the shareholding of Harison is quite spread out, with only 2 other substantial shareholders, i.e. one Dato Mohamed Nazri (owning 7.35%) & one Lim Soon Tham (owning 9.52%).

Harison (closed at RM1.20 yesterday) is trading at a trailing PE of 2.9 times (based on last 4 quarters' EPS totaling 42 sen) or at a Price to Book of 0.4 times (based on a NTA per share of RM3.12 as at 30/9/2008). In addition, the stock has a dividend yield of 6.25%. At these multiples, Harison is deemed very attractive. No wonder the shareholders rejected the BRI offer, even at RM1.45!

Chartwise, Harison is a bore! Its share price has been adrift for the past 8 years; trading between RM1.00 & RM1.60. If not for the BRI offer, the share price was trading in the tight range of RM1.20-1.40.


Chart: Harison's monthly chart as at Nov 26, 2008 (source: Quickcharts)

Harison is a very attractive stock for long-term investing. Its potential to generate an substantial capital gain in the near-term is however quite low.
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2 comments:

  1. GamelionThursday, November 27, 2008 2:08:00 PM

    The high dividend yield is offset by its share price that languishing below its IPO price of RM1.70 for more than 5 years. Those initial IPO holders have only a very insignificant return when taken into the account of inflation rate.Moreover their management have internal squabbling of their share ownerships with future legal contingency liabilities .

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  2. Alex LuTuesday, December 09, 2008 9:33:00 AM

    Hi Gamelion,

    Thanks for the insight on the management dynamic of this company. Past financial results seems to indicate that the differences between the shareholders have not affected the performance of their duties to the company & minority shareholders.

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