Tienwah: Bottom-line worsened

Result Update

For QE31/3/2015, Tienwah's net profit rose 167% q-o-q to RM2.1 million while revenue was only marginally higher at RM87.5 million. Compared to the same quarter last year, net profit was 52% lower while revenue was 5% higher.

Tienwah's PBT dropped q-o-q from RM1.5 million to RM1.2 million. While the drop is small, it must be noted that PBT for QE31/12/2014 was significantly impacted by a series of one-off  items, such as sales  rebate  of RM3.9  million, redundancy  expenses  of  RM2.0 million  and  write -down  of inventories to net realizable value of RM2.2 million. If these exceptional items were excluded, PBT for QE31/12/2014 would have been much higher at RM9.5 million. And, the q-o-q drop in PBT would have been RM8.5 million (instead of only RM0.3 million). Thus, Tienwah's financial performance has worsened contrary to my earlier expectation.


Table: Tienwah's last 8 quarterly results


Chart 1: Tienwah's last 32 quarterly results

Valuation

Tienwah (closed at RM1.86 yesterday) is trading at a PE of 16 times (based on my projected EPS 11.7 sen). If the one-off items booked in QE31/12/2014 were excluded, the last 4 quarters' EPS would be higher at 20.0 sen and the PE multiple would be lower at 9.3 times. Since Tienwah's earnings showed no improvement in QE31/3/2015, there is no point in worrying about under-estimating its earnings going forward... for now. At the PE multiple of 16 times, Tienwah is deemed fairly valued.

Technical Outlook

As noted previously, Tienwah has been in a gradual downtrend since the beginning of 2014. It seems to have found its support at RM1.85-1.87.


Chart 2: Tienwah's weekly chart as at May 14, 2015_10.30am (Source: Share Investors)

From the monthly chart, we can see that the stock is however in a long-term uptrend with support at RM1.70.

 
Chart 3: Tienwah's monthly chart as at May 14, 2015_10.30am (Source: Share Investors) 

Conclusion

Despite the poor financial performance, Tienwah could be a good stock for long-term investment based on its mildly positive technical outlook.

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, Tienwah.