Today will have a good day for HPI. Firstly, HPI has also announced a 1-for-4 Bonus Issue. Secondly, it announced a good set of results for 4Q2009 ended 31/5/2009 which shows a big jump in net profit of 13.1% q-o-q or 24.5% y-o-y to RM5.0 million. Turnover at RM89 million is lower than the immediate preceding quarter by 9.4% but was 20.0% higher than previous corresponding quarter. The y-o-y increase in net profit is due to "the contribution of subsidiary at Perak which has resumed to normal production activity after the fire outbreak in Sept’ 2007 and the paper mill company which acquired in Aug’ 2008", while the q-o-q improvement is due to "the favorable material price, effective cost cutting measures and improvement in production efficiency and productivity". HPI has also benefited from lower effective tax charges due to certain subsidiaries having brought forward "unabsorbed capital allowances and claims of reinvestment allowances".
Table: HPI's last 8 quarterly results
Chart 1: HPI's 18 quarterly results
Valuation
HPI (closed at RM0.96 yesterday) is now trading at a trailing PE of 2.2 times! That's as cheap as it can get in the stock market. However, HPI's cheap valuation has been noted before (here).
Technical Outlook
In the past 8 years, HPI has been trading in a band between RM0.60 & RM1.50 (see Chart 2). It is also in a medium-term downtrend line, with resistance at RM1.18 (see Chart 3). As at 10.45am, HPI was trading at RM1.21- indicating a possible breakout of the medium-term downtrend line. If the breakout can sustain, there is a possibility that HPI may test the RM1.50 upper trading band.
Chart 2: HPI's monthly chart as at July 29, 2009 (Source: Quickchart)
Chart 3: HPI's weekly chart as at July 29, 2009 (Source: Quickchart)
Conclusion
Based on cheap valuation, improving financial performance & possible technical bullish breakout, HPI could be a good trading & long-term BUY.
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