Yee Lee- an attractive consumer stock

Background

Yee Lee Corporation Bhd ('Yee Lee') is involved in manufacturing; marketing & distribution of fast-moving, high quality consumer products (such as household food products, oral care products, household cleaners and laundry products); and eco-tourism (which is carried out near its Sabah Tea estate, near the foothills of Mount Kinabalu). Its manufacturing operations include:
- Manufacturing of corrugated fiberboard cartons and boxes
- Milling of crude palm oil and palm kernel
- Printing and manufacturing of general line tin cans
- Manufacturing and distribution of tea

Recent Financial Results

Yee Lee has just announced its results for 3Q2009 ended 30/9/2009, where its net profit increased by 10.7% q-o-q or 63.6% y-o-y to RM5.0 million. Its turnover declined by 1.1% q-o-q or 11.5% y-o-y to RM175.5 million. The lower turnover was "primarily due to the substantial decrease in crude palm oil price which directly reduced the selling price of oil palm products coupled with the decrease in sales of Procter and Gamble's products. However the sharp decrease had been mitigated by the substantial increase in the sales of bottled water and other agency products such as Campbell's and Dutch Lady."


Table 1: Yee Lee's 8 quarterly results


Chart 1: Yee Lee's 13 quarterly results


Financial Position

Yee Lee's financial position as at 30/9/2009 is deemed fair, with current & gearing ratios at 1 time and 0.8 time, respectively. To be fair, the gearing ratio includes short-term borrowings of RM144 million which was used to finance its working capital.

Valuation

Yee Lee (closed at RM1.39 yesterday) is now trading at a trailing PE of 5.0 times (based on last 4 quarters' EPS of 28 sen) or at a Price to Book of 0.45 times (based on NTA per share of RM3.06 as at 30/9/2009). At these multiples, Yee Lee is fairly attractive.

Technical Outlook

Yee Lee appears to have been trapped in a bottoming phase over the past 3 years until it broke above the RM1.20 resistance level in March. Since then, it had surpassed the resistance level of RM1.40 (to hit a high of RM1.53 in early November). Since then, it has dropped below the RM1.40 level but was able to stay above the 100-day SMA line of RM1.35.


Chart 2: Yee Lee's daily chart as at Dec 2, 2009_4.45pm (Source: Quickcharts)


Chart 3: Yee Lee's monthly chart as at Dec 1, 2009 (Source: Tradesignum)

Conclusion

Based on improving financial performance & attractive valuation, Yee Lee is a good stock for long-term investment.