PIE- still in a long-term uptrend

Results Update

PIE reported a good set of results for QE30/9/2011. Its net profit increased by 11% q-o-q or 71% y-o-y to RM8.8 million while turnover increased by 5% q-o-q or 32% y-o-y to RM95 million. PIE's bottom-line improved sequentially due to higher margin & lower operating expenses but partially offset by higher provision for doubtful debts.


Table: PIE's last 8 quarterly results

Chart 1 shows PIE's top-line has been rising steadily for the past 3 years but its bottom-line has been rather flattish. From Chart 2, we can see that the company's profit margin has deteriorated from 2008 to 2010. However, the drop in profit margin seems to have been arrested in 2011. Can the company do more to improve on its profit margin? Only time will tell.


Chart 1; PIE's last 14 quarterly results



Chart 2: PIE's profit margin for the last 14 quarterly results

Concern for its Thai plants

PIE has three plants in Thailand. The biggest of these is located in Prachinburi, with a land area of 5.84 acres & a built-up area of 6514 sq meter. It has two more plants in Pathumtani- one with a land area of 0.64 acre & a built-up area of 2251 sq meter and another with a land area of 0.44 acre & a built-up area of 1183 sq meter. Prachinburi & Pathumtani are located to the east of Bangkok and as such are likely to be affected by the current flood. I do not know whether PIE's 3 plants there have been affected by the flood.

Valuation

PIE (closed at RM3.65 at the close of the morning session) is now trading at a PE of 7.4 times (based on last 4 quarter's EPS of 49 sen). Based on this multiple, PIE is deemed inexpensive. It could potentially trade up to a PE of 9-10 times.

Technical Outlook

From the chart below, we can see that PIE is in a long-term uptrend line with support at RM3.20. The next resistance is at RM3.60 & then at RM4.00.


Chart 3: PIE's monthly chart as at Nov 8, 2011 (Source: Tradesignum)

Conclusion

Based on good financial performance, reasonable valuation & positive technical outlook, PIE could be a good stock for long-term investment.