Kian Joo had a poorer 4Q2008 as compared to 3Q2008

Kian Joo has just announced its results for 4Q2008. Net profit dropped by 39% q-o-q to RM12.8 million on the back of a 6%-drop in turnover to RM230 million. Kian Joo suffered from higher cost of raw material & forex losses. When compared to the previous year corresponding quarter, net profit is up 5% while turnover is up 15%.



Last Friday, I have pointed out that Kian Joo's technical outlook seems very promising, to wit: Kian Joo has just broken above its medium-term downtrend line resistance at RM1.25 and the neckline of an inverted "head-and-shoulders" formation at the RM1.22 level. Before we get to the possible reason for this rally, we shall note that this rally has now fizzled out & the share price has pulled back sharply & it is struggling to stay above the neckline of the inverted "head-and-shoulders". If the share price failed to do so, then the bullish technical outlook will be negated.


Chart: Kian Joo's daily chart from Feb 26, 2009 (source: Tradesignum.com)

Over the weekend, the Edge newsletter has 2 stories that related to Kian Joo. The first story is about Can-One Bhd, the country's largest maker of tin cans for edible oils, may have obtained the financing to acquire up to a 34.64% stake in Kian Joo (go here). Can-One may choose to acquire a minimum of 32% to avoid a general offer or up to 34.64%. Given the difficulty Can-One seems to have in securing the financing for this acquisition, I believe it will likely to avoid a general offer. So, minority shareholders have nothing to look forward to. In fact, one should be a bit concerned whether the change of management will be beneficial to Kian Joo. In my opinion, Kian Joo's present management team- despite their on-going feud- appears more experienced than Can-One's team.

The second story is Kian Joo may be in the running to secure the bottling job for Coca-Cola franchise (go here). That is the same franchise currently handled by F&N that will be terminated in early 2010. A quick decision by Coca-Cola is needed because a replacement will have to be selected soon, so that a new bottling plant can be set up in time for the change-over. If Kian Joo can secure this contract, it can add RM200-300 million to its top-line.

I am positive on the second story, but neutral on the first story.