Yinson- an attractive value stock

Background

Yinson Holdings Bhd ('Yinson') is involved mainly in transportation, shipping, forwarding, and marine transport services.

Recent Financial Results

For QE31/1/2011, Yinson's net profit increased by 169% q-o-q or 90% y-o-y to RM6.8 million while turnover was mixed- increased by 39% y-o-y or dropped 3% q-o-q - to RM152 million. The better bottom-line was attributable to increased gross profit margin for all segments of business.


Table 1: Yinson's last 8 quarterly results



Chart 1: Yinson's last 13 quarterly results

Financial Position

As at 31/1/2011, Yinson's financial position is mixed. Current ratio stood at 1.15 times while debts to equity is high at 1.56 times. The high leverage is due to high short-term borrowings (of RM144 million) to finance its working capital requirement. The bulk of the working capital is tied down in Trade Receivable (of RM236 million). Trade Receivable turnover period is 134 days, which I think is the average credit period in its industry. As such, I consider its financial position to be satisfactory.

Valuation

Yinson (RM1.10 as at 10.30am today) is now trading at a PE of 4.1 times (based on last 4 quarters' EPS of 27 sen). At this multiple, Yinson is deemed fairly attractive.

Technical Outlook

Yinson is in an uptrend, with uptrend line support at RM0.80. Immediate horizontal line support at RM1.00. Its upside could be capped by the line connecting its peaks over the past 2 years. As such, its immediate target could be about RM1.20-1.25.


Chart 2: Yinson's weekly chart as at Mar 29, 2011 (Source: Quickcharts)

Conclusion

Based on good financial performance, attractive valuation & positive technical outlook, Yinson could be a good stock for medium-term investment.