Background
Tai Kwoong Yokohama (Yoko) is involved in the manufacture & sale of automotive batteries.
Recent Financial Results
Yoko announced its results for 3Q2009 ended 30/9/2009. Its net profit jumped 113% q-o-q to RM6.5 million on the back of a 24%-increase in turnover to RM53 million. Because of the jump in turnover, Yoko recovered from a net loss of RM1.5 million incurred in 3Q2008. The improved performance was due to higher margin, higher sale volume, lower finance cost & lower corporate expenses.
Table 1: Yoko's 8 quarterly results
Chart 1: Yoko's 21 quarterly results
Lead price movement
Lead, the main component in the production of automotive batteries, has been rising since the end of 2008. It bottomed at the 1000-point level, which was a fairly steep drop from its high of 4000-point recorded in October 2007. I believe that Yoko values its inventory on a First-in-First-out (FIFO) method, with a production time lag of about 6-9 months. So, the higher cost of lead in October 2007 impact its bottom-line in QE30/9/2008 & QE31/12/2008. Similarly, the lower cost of lead in November 2008 will boost its bottom-line in QE30/9/2009 & QE31/12/2009.
Chart 2: Lead's weekly chart as at Nov 12, 2009 (Source: London Metal Exchange)
Valuation
Yoko (trading at RM1.20 as at 4.45pm) has a PE multiple of 5.5 times (based on the last 4 quarters' EPS of 22 sen). At this multiple, Yoko is a fairly attractive stock, even though it is a small & illiquid stock and should trade a slight discount.
Technical Outlook
Yoko has broken above its long-term downtrend line at RM0.80-90 in September. It has just surpassed its July 2007 high of RM1.16. The next resistance is at RM1.40 and thereafter RM1.60.
Chart 3: Yoko's monthly chart as at Nov 12, 2009 (Source: Quickcharts)
Conclusion
Based on good financial performance, attractive valuation & bullish technical breakout, Yoko may continue to go up.
The quaterly revenue is within the 50 million range for some quarters already. It could suggest that its market share and revenue is stagnant.
ReplyDeleteUnless new market is penetrated, and consumer is pass with any raw mat price increase, this could be a mid term BUY.
Alex, how do you see NSTP and Media deal? Any upside for these stocks?
Dear Alex,
ReplyDeletePetra its almost there, right?
hehe...thanks a lot.
Hi Alex,
ReplyDeleteWhat do You think about MSPORT?
Do you think current price is the best price to go in? Any Comment about it?
Hi Solomon,
ReplyDeleteI think the revised takeover offer for NSTP by Media is fair and it is reflected in the current prices of the stocks. There is little point in buying into NSTP now for arbitrage opportunity. Media is a good stock for long-term investing. It has two strong positive points that will appeal to investors: it's the largest media group in the country and it has cut off its loss-making operation in the Philippines that was a drag on its bottom-line.
Hi Yumi,
ReplyDeletePetra reported a pre-tax loss of RM.9 million for QE0/9/2009 due to forex losses, lower vessel utilization, lower charter rate and lower contribution from maintenance sector. I think the loss is a one-off event & the company should return to profitability in the next quarter.
The support for the stock is at RM1.80-90 and thereafter RM1.60-65. I do not foresee a test of the lower prices at this time.
Hi Teh,
ReplyDeleteMSport formed a base around the 50 sen level, before rallying to a recent high of RM0.72. At the current price of RM0.54-55, we are very near from that base. It should be a safe level to make your entry.
We don't have much to go on with this stock- only its results for QE30/6/2009 where it recorded a net profit of RM13.6 million on turnover of RM52.9 million. MSport is a producer of shoe soles. Since its listing on our exchange, we have another 2 listings of PRC companies involved in the production of sport shoes & apparel, i.e. XDL and Xinquan. I would prefer XDL & Xinquan to MSport strictly from a business point of view. However, I have not looked into the accounts of XDL & Xinquan and I must add that I am very cautious when it comes to PRC companies listed outside China & Hong Kong. I think most investors share the same sentiment which may explain why these stocks trade at cheap PE multiples.