TChong- bottom-line hit by import tax duties

Result Update

For QE30/9/2013, TChong's net profit dropped 53% q-o-q or 3% y-o-y to RM32 million while revenue  was up 11% q-o-q or 35% y-o-y to RM1.27 billion. The drop in the bottom-line was due to provision for import tax duties of RM56 mil charged by the Vietnamese givernment. TChong is appealing on the Vietnamese government decision.


Table: TChong's last 8 quarterly results

The RM56 million import tax duties provision knocked down TChong's profit numbers & profit margin substantially. If not for this negative item, TChong's profit and profit margin would have been higher than the same quarter last year and the immediate preceding quarter (see the arrows on Chart 1).

Chart 1: TChong's last 27 quarterly results

Valuation

TChong (closed at RM6.40 yesterday) is now trading at a PE of 17 times (based on last 4 quarters' EPS of 36 sen). At this PE multiple, TChong is deemed fairly valued.

Technical Outlook

TChong is in an uptrend with resistance at RM6.70-6.80 and support at RM6.10-6.20. Next support is the horizontal line at RM5.30.


Chart 2: TChong's weekly chart as at Nov 21, 2013_10.30am (Source: quickcharts)

Conclusion

Based on good financial performance (albeit the hiccup on the import tax duties matter) & positive technical outlook, TChong is a good stock for long-term investment. However, Its upside potential is limited as the stock is fully valued.

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, TChong.