TWSPLNT has just announced its results for QE31/2/2012. Its net profit dropped 96% q-o-q or 91% y-o-y to RM4 million while its turnover dropped 24% q-o-q but rose 165% y-o-y to RM608 million. The company explained that the drop in bottom-line was due to lower FFB output; share of losses of JV entity; and, pre-tax loss for the Manufacturing & Trading segment.
Table 1: TWSPLNT's last 8 quarterly results
I have tabulated the segmental reports below. The drop in pre-tax profit was due mainly to a sharp drop in plantation results & revenue. The explanation that the Plantation segment performed poorly due to a decline in FFB output [because of the seasonal factor] & lower CPO prices is not satisfactory. CPO prices have been very good in QE31/3/2012 and the revenue for QE31/12/2012 is even lower than QE31/3/2011. The drop in profit could be due to the share of losses from the JV entity but why should the revenue be lower. Something is not quite right!
Table 2: TWSPLNT's results on q-o-q & y-o-y comparison
Chart 1: TWSPLNT's last 16 quarterly results
Valuation
TWSPLNT (at RM4.82 at 10.30am) is trading at a trailing PE of 10.5 times (based on last 4 quarterly EPS of 46 sen). However, I feel that we should use the last 4 quarterly EPS to compute the PE multiple of this stock because we are sure whether TWSPLNT's earning going forward would resemble its past 4 quarterly results.
Technical Outlook
TWSPLNT has been rising in an uptrend since the middle of 2010. The stock could test its 200-day SMA line at RM4.40 and then its strong horizontal line at RM4.00.
Chart 2: TWSPLNT's daily chart as at May 17, 2012_9.45am (Source: quickchrts)
Conclusion
Based on serious concern raised on the company's financila performance, I believe the prudent approach to TWSPLNT is to SELL or REDUCE. We should wait until a clearer picture has emerged or when the stock has retraced to the RM4.00-4.40 level.
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