Results Update
Tongher has just its results for QE30/6/2011 where its net profit increased by 13% q-o-q or 80% y-o-y to RM14.7 million while its turnover increased by 15.5% q-o-q or 161% y-o-y to RM166 million. The overall improvement was attributed to higher sales of stainless steel fasteners. Recently, there was a report that 8 Malaysian companies were exempted from anti-dumping duties of 85% imposed the European Union. The duties affect mostly China-made fasteners. Tongher is likely to be one of those companies exempted from the duties. If so, it should continue to enjoy good demand for its products. For more, go here.
Table: Tongher's last 8 quarterly results
Chart 1: Tongher's last 27 quarterly results
Financial Position
Tongher's financial position as at 30/6/2011 is deemed healthy with current ratio at 2.3 times and debts to equity at 0.4 time.
Valuation
Tongher (closed at RM1.93 last Friday) is now trading at a PE of 6.2 times (based on last 4 quarters' EPS of 31.23 sen). Given the current market sentiment, this PE multiple is deemed fair.
Technical Outlook
Since the high of RM2.80 in early January 2011, Tongher has been sliding. In the past few days, it struggled to hold onto the psychological RM2.00 support, without success. It may find support at the upper boundary of the previous triangle at RM1.80.
Chart 2: Tongher's weekly chart as at August 19, 2011 (Source: Quickcharts)
Conclusion
Based on good financial performance & fair valuation, I would rate Tongher a HOLD despite the negative technical outlook.
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