Results Update
TSM has just announced its results for QE30/4/2011. Its net profit dropped 63% q-o-q or 44% y-o-y to RM4.7 million while turnover dropped 16% q-o-q but rose 25% y-o-y to RM92 million. The company explained the decline in its top-line & bottom-line was due to the Supply Chain disruption brought on by the recent Japanese Earthquake & Tsunami. However, if you look at Chart 1 & Chart 2 below, you can see that the company's top-line peaked 2-4 quarters ago. If not for the addition of the new business of die-cast & precision manufacturing, TSM's top-line would have dropped earlier. The other thing to note is the new business of die-cast & precision manufacturing is a loss-making, except for a small pre-tax profit in QE31/1/2011.
TSM has just announced its results for QE30/4/2011. Its net profit dropped 63% q-o-q or 44% y-o-y to RM4.7 million while turnover dropped 16% q-o-q but rose 25% y-o-y to RM92 million. The company explained the decline in its top-line & bottom-line was due to the Supply Chain disruption brought on by the recent Japanese Earthquake & Tsunami. However, if you look at Chart 1 & Chart 2 below, you can see that the company's top-line peaked 2-4 quarters ago. If not for the addition of the new business of die-cast & precision manufacturing, TSM's top-line would have dropped earlier. The other thing to note is the new business of die-cast & precision manufacturing is a loss-making, except for a small pre-tax profit in QE31/1/2011.
TSM has indicated that the worst is behind it in term of disruption to supply chain was in the month of May & it expects the situation to normalize by September. This means that the results for the next quarter would likely to be below par.
Table: TSM's 8 quarterly results
Chart 1: TSM's last 28 quarterly results
Chart 2: TSM's last 5 quarterly results by segments
Valuation
TSM (closed at RM1.54 as at June 30, 2011) is now trading at 5.8 times (based on last 4 quarters' EPS of 26.57 sen). With the next quarter result expected to be weak (how weak we can say), TSM's earning for current year would have to be lowered. I believe TSM is currently trading at fair value, after taking into consideration possible recovery in the wire harness in later part of the year & the possible continuation of losses to be incurred by the die-cast & precision manufacturing business.
Technical Outlook
From the chart below, we can see that TSM has broken below its long-term uptrend line support at RM1.72. Its next support is at the horizontal line at RM1.60 & then at RM1.45.
Chart 3: TSM's weekly chart as at June 29, 2011 (Source: Quickcharts)
Conclusion
Based on the deterioration in the financial performance and poor technical outlook, we should take profit on TSM.
Chart 1: TSM's last 28 quarterly results
Chart 2: TSM's last 5 quarterly results by segments
Valuation
TSM (closed at RM1.54 as at June 30, 2011) is now trading at 5.8 times (based on last 4 quarters' EPS of 26.57 sen). With the next quarter result expected to be weak (how weak we can say), TSM's earning for current year would have to be lowered. I believe TSM is currently trading at fair value, after taking into consideration possible recovery in the wire harness in later part of the year & the possible continuation of losses to be incurred by the die-cast & precision manufacturing business.
Technical Outlook
From the chart below, we can see that TSM has broken below its long-term uptrend line support at RM1.72. Its next support is at the horizontal line at RM1.60 & then at RM1.45.
Chart 3: TSM's weekly chart as at June 29, 2011 (Source: Quickcharts)
Conclusion
Based on the deterioration in the financial performance and poor technical outlook, we should take profit on TSM.
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