Delloyd- plantation division, the new growth driver

Background

Delloyd Ventures Bhd ('Delloyd') is involved in the manufacture of automotive components, distribution of motor vehicles & cultivation of oil palm.

Recent Financial Results

Delloyd's results for QE31/3/2011 is quite encouraging, albeit a slight drop in its turnover of 10% q-o-q due to higher sales in the preceding quarter arising from the completion and delivery of 25 units of bus chassis in Indonesia. Compared to the same quarter last year, Delloyd's turnover was up 42%. Net profit increased by 25% q-o-q or 105% y-o-y to RM16.8 million.

Note: Delloyd has changed its financial year end to December 31 to March 31, some of the comparison made above may not be accurate.


Table: Delloyd's past 8 quarterly results



Chart 1: Delloyd's last 12 quarterly results

Financial Position

Delloyd's financial position as at 31/3/2011 is deemed satisfactory, with current ratio at 2.05 times & debts to equity at 0.21 time.

Valuation

Delloyd (closed at RM3.57 today) is now trading at a PE of 6.3 times (based on last 4 quarters' EPS of 56.49 sen). I believe Delloyd could command a PE multiple of 8 times.

Technical Outlook

Delloyd has just broken above its medium-term downtrend line at RM3.45. With this breakout, Delloyd could continue with its prior uptrend, with daily indicators slowly turning up. Its immediate resistance is at the horizontal line at RM3.70-3.80. Monthly indicators are quite the opposite of the daily indicators as they are generally neutral or negative.


Chart 2: Delloyd's daily chart as at June 2, 2011 (Source: Quickcharts)



Chart 3: Delloyd's monthly chart as at June 1, 2011_plotted on log scale (Source: Tradesignum)

Conclusion

Based on good financial performance & undemanding valuation, Delloyd could be a good stock for long-term investment. You should exercise your discretion given the conflicting technical readings for the different time-frame.