Panamy reported its results for QE31/3/2011 recently. Its net profit dropped by 45% q-o-q or 4% y-o-y to RM14.7 million while turnover was also lower by 26% q-o-q or 2% y-o-y to RM150 million. The q-o-q decline was mainly due to the festive seasons. However, Panamy's bottom-line was also impact by higher raw material costs, which led to a disproportionately higher decline.
Table: Panamy's last 8 quarters' results
Chart 1: Panamy's last 17 quarters' results
Valuation
Panamy (closed at RM23.96 today) is now trading at a PE of 16.5 times (based on last 4 quarters' EPS of 145 sen). As a blue chip stock with a world-renowned brand, I believe Panamy could command a PE of 18 times. This gives a target price of RM26 for Panamy.
Technical Outlook
From the monthly chart (plotted on log scale) below, we can see that Panamy has been rising within an upward channel from 1998 to 2010. In 2010, Panamy broke above the channel as the share price accelerated higher. The curvy lines (in red) may provide the new boundary for Panamy's price movement going forward. It has recently tested the new upper boundary at the RM25 mark.
Chart 2: Panamy's monthly chart as at June 1, 2011 (Source: Tradesignum)
Conclusion
Based on good financial performance (albeit one quarter of disappointing result) and attractive valuation, Panamy remained a good stock for long-term investment. However, selling into strength if/when the share price goes above the RM26 mark may be a good idea.
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