TSM's second core business starts to shine

Results Update

TSM released its results for QE31/1/2011 yesterday. It is a very good set of results as it incorporates the contribution from its newly-acquired subsidiary, Kenseisha into its books). Its net profit increased by 56% q-o-q or 66% y-o-y to RM12.7 million while turnover increased by 4% q-o-q or 50% y-o-y to RM109 million.


Table 1: TSM's last 8 quarterly results



Chart 1: TSM's last 27 quarterly results

Financial Position

As at 31/1/2011, TSM's financial position is deemed very satisfactory. Its current ratio stood at 3.2 times while debts to equity stood at 0.1 time only.

Valuation

TSM (closed at RM1.90 today) is now trading at a PE of 6.3 times (based on last 4 quarters' EPS of 30 sen). At this multiple, TSM is deemed fairly attractive. With the steady growth in its bottom-line, I believe TSM could command a PE multiple of 9-10 times.

Technical Outlook

TSM has just broken above its short-term downtrend line at RM1.85 as well as the horizontal resistance at RM1.90. Its immediate resistance is at the horizontal line at RM2.08-2.10.


Chart 2: TSM's daily chart as at Apr 1, 2011_9.30am (Source: Quickcharts)

We can see that TSM's long-term uptrend line support is at RM1.65.


Chart 3: TSM's weekly chart as at Apr 1, 2011_9.30am (Source: Quickcharts)

Conclusion

Based on good financial performance, attractive valuation & positive technical outlook, TSM is a good stock for long-term investment.