Apollo- a rocket with wet powder

Background

Apollo Food Holdings Berhad ('Apollo') is engaged in the manufacturing and trading in compound chocolates and chocolate confectionery products and cakes, and the distribution and marketing of compound chocolates and chocolate confectionery products and cakes.

Recent Financial results

For QE31/7/2012, its net profit dropped 8.3% q-o-q but rose 151% y-o-y to RM8.0 million while revenue increased by 4.6% q-o-q or 18.0% y-o-y to RM58.8 million. Apollo's net profit benefited from increased revenue, which in turn is due to higher sales from domestic & export markets as well as the fall in the prices of certain raw material.


Table 1: Apollo's last 8 quarterly results


Chart 1: Apollo's last 20 quarterly results

Financial Position

Apollo's financial position is deemed very healthy. As at 31/7/2012, its current ratio stood at 12.4 times. Not only it did not have any borrowing, it has cash reserves of RM59 million or 74 sen per share.

Valuation

Apollo (closed at RM3.23 on Friday) is trading at a PE of 9.7 times (based on last 4 quarters' EPS of 33.21 sen).It also traded at a Price to Book of 1.2 times or a dividend yield of 6.2%. As such, Apollo is a good income stock that trades at reasonable PE & PB multiples.

(Note: The entitlement date for the final dividend of 20 sen will be  on December 10).

Technical Outlook

Apollo is in a gradual upward channel.


Chart 2: Apollo's monthly chart as at Sept 28, 2012 (Source: Tradesignum)

However, its immediate resistance is likely to be about RM3.40-3.50. On weakness, it may drop back to the support of RM3.10.


Chart 3: Apollo's weekly chart as at Sept 28, 2012 (Source: Tradesignum)

Conclusion

Based on good financial performance, strong financial position, reasonable valuation & mildly positive, albeit unexciting technical outlook, Apollo could be a good stock for long-term investment.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Apollo.