Pelikan is involved in the manufacturing & distribution of writing instruments, art, painting & hobby products, office stationeries & printing consumables. In 1Q2010, it completed the acquisition of the Herlitz, Molkari & Ganymed group, which is involved in the sales of school and office products. For more on Herlitz, go here.
Recent Financial Results
Pelikan's results are pretty volatile. In QE31/3/2010, its net profit soared due to the recognition of negative goodwill of RM143.1 million from the acquisition of the Herlitz, Molkari & Ganymed group.
Table: Pelikan's last 8 quarterly results
Chart 1: Pelikan's 24 quarterly results
Financial Position
Pelikan's financial position is deemed satisfactory, with current ratio at 1.63 times & debt to equity at 0.57 time as at 30/6/2010.
Valuation
From the EPS of 4.58 sen for QE30/6/2010 & assuming that this June quarter accounts for 45-50% of its earning for a full year, I have arrived at an estimate for FY2010 EPS of 10 sen. Based on current price of RM1.24, Pelikan is trading at a PE of 12.4 times. At this multiple, Pelikan is deemed fairly valued, with limited potential upside.
Technical Outlook
Pelikan has been sliding even since it made a high of RM1.60 in August 2009. It has just broken above its downtrend line at RM1.21-1.22. Its next resistance levels are at the horizontal lines of RM1.30 & then RM1.40.
Chart 2: Pelikan's daily chart as at Oct 11, 2010 (Source: Tradesignum)
Conclusion
Based strictly on technical consideration, Pelikan could be a good trading BUY. However, if Pelikan can derive synergy from its new acquisition, it should be a stock to watch.
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