MBL- a safer proxy to the oil palm sector

Background

Muar Ban Lee Bhd (‘MBL’) is a manufacturer of oil seed crushing machinery, providing "One Stop Service" in setting up Palm Kernel Crushing Plants from Plant Design and Fabrication to Installation and Commissioning. It had successfully completed hundreds of oil seed crushing plants for major plantations and oil mills throughout the world. I guess MBL is to the palm kernel crushing plant what CBIP is to palm oil mill. Both are obviously benefiting from the breakneck development of oil palm estates.

Recent Financial results

In QE31/3/2012, MBL's net profit increased by 92% q-o-q or 239% y-o-y to RM6.5 million while revenue increased by 95% q-o-q or 120% y-o-y to RM24.4 million. The company attributed its better performance to higher recognition of results from its project sales. The company guided that it will achieve better results for FY2012 in view of its strong order book.


Table: MBL's last 8 quarterly results


Chart 1: MBL's last 11 quarterly results

Valuation

MBL (closed at RM0.975 yesterday) is now trading at a trailing PE of 5.3 times (based on last 4 quarters' EPS of 18.25 sen). At this multiple, MBL is deemed fairly attractive.

Technical Outlook

MBL broke above its expanding triangle at RM0.80 in March. With this breakout, MBL has just started on its upleg.

Chart 2: MBL's daily chart as at May 24, 2012 9Source: Tradesignum)

Conclusion

Based on good financial performance, attarctive valuation & bullish technical outlook, MBL could be a good stock for long-term investment.