Hiaptek- bottom-line inched higher

Background

Hiap Teck Ventures Bhd ('Hiaptek') is involved in the manufacture, rental, and distribution of steel pipes, hollow sections, scaffolding equipment and accessories, and other steel products.It has a 55%-stake in a JV with China Shougang International Trade & Engineering Corporation of China to build an integrated steel mill in Kemaman, Terengganu. The JV vehicle is Eastern Steel Sdn Bhd. The mill will have a production capacity of 1.5 million tonnes of steel slabs and cost RM750 million. The mill is currently under construction and expected to be completed end of the year (here).


Source: Company's website

Result Update

For QE31/10/2013, Hiaptek's net profit increased by 14% q-o-q or 13-fold to RM14 million while revenue dropped marginally to RM270 million. The improved bottom-line was attributed to the share of profit from jointly controlled entity.


Table 1: Hiaptek's last 8 quarterly results

From the chart below, we can see that Hiaptek's profit margin is slowly recovering. This could be a sign that the company's profit could improve in the years ahead.


Chart 1: HiaptekScientx's last 31 quarterly results

Valuation

Hiaptek (closed at RM0.745 yesterday) is now trading at a current PE of 14.1 times (based on annualized EPS of 5.28 sen). At this price, it has a Price/Book Value of 0.6 time (based on NTA of RM1.30 p.s.) The elevated PE will contract once the earning expands. For now, the P/BV ratio will be a better guide of the stock's valuation and that multiple seems to suggest that the stock is reasonably valued.

Technical Outlook

Hiaptek has broken above its downtrend line in May. A short-term uptrend has begun but it is capped by the immediate resistance at RM0.75. If it can surpass this level, its next resistance is at RM0.90.


Chart 2: Hiaptek's weekly chart as at Dec 17, 2013 (Source: Tradesignum)

Conclusion

Based on improving financial performance and positive technical outlook, Hiaptek 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, Hiaptek.