MFlour- another great 'challenging' year (whatever)

Results Update

MFlour announced another great quarterly results for QE31/12/2010. Its net profit increased by 18% q-o-q or 47% y-o-y to RM28.5 million while turnover increased by 8% q-o-q or 39% y-o-y to RM459 million. The company attributed the improved performance to higher revenue & margins in the flour segment which offset the poorer performance of the feeds & poultry integration segments.


Table 1: MFlour's last 8 quarterly results


Chart 1: MFlour's 19 quarterly results

Valuation

MFlour (closed at RM5.24 at the end of the morning session) is now trading at a PE of 6.6 times (based on last 4 quarters' EPS of 79 sen). At this PE multiple, MFlour is deemed quite attractive.

Technical Outlook

MFlour is in an uptrend. This morning, it broke above the horizontal resistance at RM5.00. Its next horizontal resistance is at RM5.50. Below, I have combined the monthly chart of MFlour & its Return on Paid-up Capital. We can clearly see that MFlour's share price movement in line with its Return on Paid-up Capital. Will MFlour be able to maintain its good performance for FY2011?


Chart 2: MFlour's monthly chart as at Feb 2, 2011 (Source: Tradesignum)

Other Comments

MFlour “envisaged 2011 to be another challenging year with volatile grain and fuel prices as well as ocean freight and foreign exchange rates” (see Note 16 of its detailed financial statements for QE31/12/2010). This is nearly identical to the comments made in the preceding year: “In spite of the expected global recovery, the Board envisage 2010 would be another challenging year where commodity prices, fuel, ocean freight and foreign exchange rates are expected to remain volatile” (see Note 17 of detailed financial statements for QE31/12/2009). Can the company be a bit more helpful in its guidance? I mean, you made an EPS of 79 sen for FY2010 & you called that a challenging year! How would a normal year looks like, let alone a great year?


Table 2: MFlour's Key Financial Statistics from 1994 to 2010

Conclusion

Based on the good financial performance & cheap valuation, I would continue to rate MFlour a good investment stock. Buy on weakness.