Tongher: Poised to move higher

Result Update

For QE30/6/2014, Tongher's net profit increased by 15% q-o-q or 62% y-o-y to RM9.7 million while revenue was mixed- dropped 1% q-o-q but 6% y-o-y to RM132 million. For 1HFY14, Tongher's revenue increased due to the increase in sales demand from both fasteners and aluminium division. Higher sales demand has led to higher profit before tax, in conjunction with the improvement from the profit margin attained in current quarter-to-date.


Table 1: Tongher's last 8 quarterly results


Chart 1: Tongher's last 39 quarterly results 

Valuation

Tongher (closed at RM2.19 yesterday) is trading at a PE of 12 (based on last 4 quarters' EPS of 18.85 sen). At this PE, Tongher is deemed fairly valued.

Technical Outlook

Tongher has broken above the horizontal resistance at RM2.20 (See Chart 2). More importantly, Tongher has broken above its long-term downtrend line at RM2.10 (see Chart 3). With this breakout, the stock is poised to begin its next upleg. Its next resistance will be at RM2.50 & thereafter at RM2.85.

 
 Chart 2: Tongher's weekly chart as at Aug 29, 2014 (Source: Tradesignum)


Chart 3: Tongher's monthly chart as at Aug 29, 2014 (Source: Chartnexus)

Conclusion

Based on improved financial performance & bullish technical outlook, Tongher is rated a BUY.

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, Tongher.