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
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: Hiapte
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.
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)
Based on improving financial performance and positive technical outlook, Hiaptek could be a good stock for long-term investment.
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.