Harbour- a stock with good potential

Background

Harbour-Link Group Berhad ('Harbour') is an investment holding company with subsidiaries involved in logistics; shipping, forwarding, and transportation; and marine, engineering and construction; driver training; and road safety consultancy services. It is based in Sarawak.

Recent Financial Results

Harbour has just announced its results for FY2009 ended 30/6/2009. For 4Q2009, its net profit increased by 6.1% q-o-q to RM6.7 million while turnover was up 2.5% to RM70.5 million. Compared to 4Q2008, net profit was down 32.4% while turnover was 28.4% lower.



Financial Position

Since Harbour was the result of a restructuring scheme involving the financial-strapped Tongkah Holdings Bhd, it is wise to have a look at its current financial position. As at 30/6/2009, its current ratio is satisfactory at 1.76 times while gearing ratio is low at 0.32 times. As such, Harbour is a fairly healthy company.

Valuation

Harbour (closed at RM0.75 yesterday) is now trading at a trailing PE of 5.4 times (based on last 4 quarters' EPS of 14.4 sen) or at a Price to Book of 0.6 times (based on NTA per share of RM1.22). Based on these, Harbour is deemed fairly attractive.

Technical Outlook

Harbour may have broken above its medium-term downtrend line at RM0.58-60 in April. The stock is presently consolidating within a triangle, awaiting breakout. The upleg would continue if the price can surpass RM0.78-80 level. The next resistance is at RM0.88-90 & thereafter at RM1.00. You also need to watch out a downside breakout at RM0.70-72. If the latter were to happen, the stock may drift back to the strong horizontal support of RM0.60.


Chart: Harbour's weekly chart as at Aug 25, 2009 (Source: Quickcharts)

Conclusion

Based on attractive valuation & nice technical set-up, Harbour is a stock with good potential to go higher. The trigger for the next upleg is an upside breakout at RM0.78-80.