Kianjoo- look out for the Bonus Issue

Result Update

For QE31/3/2013, Kianjoo's net profit dropped 32% q-o-q but increased by 12% y-o-y to RM30 million while revenue has similarly dropped by 3% q-o-q but rose by 13% y-o-y to RM301 million. When compared to the immediate preceding quarter (QE31/12/2012), revenue from Cans & Cartons division dropped due to higher orders from customers in QE31/12/2012 to meet festive season demand. Pre-tax profit for Cans division dropped 19% q-o-q to RM34.9 million (due mainly to derivative losses of RM1.8 million cf. gain of RM4.2 million previously). Cartons division's pre-tax profit dropped 21% q-o-q to RM3.8 million due to lower sales & higher operating overhead & cost. Contract Packaging Services division reported lower revenue of  RM12.8 million (from RM14.7 million ) and a pre-tax loss of RM2.1 million cf. to a profit of RM0.3 million previously


Table: Kianjoo's last 8 quarterly results


Chart 1: Kianjoo's last 26 quarterly results

Valuation

Kianjoo (closed at RM2.66 yesterday) is now trading at a PE of 10 times (based on last 4 quarters' EPS of 27.3 sen). At this multiple, Kianjoo is deemed fairly attractive.

Outstanding Corporate Exercise

Kianjoo has proposed a Bonus Issue of 1-for-2 and a Rights Issue of warrant on the basis of 1-for-4 shares held after the Bonus Issue at a price of only RM0.01 each. This corporate exercise attracted opposition from Canone, the present majority shareholder earlier went it was not a registered owner of the shares which it successfully bid in an auction. With the ownership of Kianjoo registered in its name, Canone- like all Minority shareholders- should welcome the proposed Bonus Issue.

Technical outlook

Kianjoo is in an uptrend line with support at RM2.20. Presently it is resting on the horizontal line at RM2.65. From here, Kianjoo may slowly rise again, especially when the date of entitlement of the Bonus Issue has been finalized.


Chart 2: KIanjoo's weekly chart as at Mar 22, 2013_11.00am (Source: Quickcharts)

Conclusion

Based on improved financial performance, attractive valuation & positive technical outlook, Kianjoo is a good stock to hold 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, Kianjoo.