Mieco was once the leading player in the manufacturing of particle boards. The industry became very competitive due to over-expansion by all the major players; leading to a collapse in the selling prices and profit margin. The 2008 Global Financial Crisis, which hit the US housing market badly, also took a toll on the demand for furniture and fittings, leading to a decline in the sales volume for particle board industry. However, the improved demand for housing units in America over the past 2 years has lifted the demand for the particle boards.
Diagram 1: Mieco's last 10 yearly P&L & CF (Source: ShareInvestor)
Recent Financial Results
Mieco's recenue has been drifting higher over the past 10 quarters. Profits have also been improving, albeit in a rather erratic fashion.
Table: Mieco's last 10 quarterly P&L & CF (Source: ShareInvestor)
Diagram 2: Mieco's last 10 quarterly P&L & CF (Source: ShareInvestor)
Fiancial Position
As at 31/3/2015, Mieco's financial position is deemed marginal. Its current ratio is worrying at 0.65X while gearing ratio is high at 0.86X. Its current ratio could improve if it can refinance its short-term borrowings with a long-term loan since it was meant for the construction of its Kuala Lipis plant.
Valuation
Mieco (closed at RM0.80 yesterday) is now trading at a PER of about 13X (based on estimated EPS of 6 sen). Price to book ratio is at 0.6X. Based on these multiples, Mieco is deemed fairly valued. Its improving financial performance would lower its PER- making the stock more appealing to investors.
Technical Outlook
In 2003, it rose from RM1.00 to a high of above RM3.00 over a period of 1 year. Since then, it went into a long decline to a low of RM0.20 in 2009. In 2014, Mieco finally broke above its long-term downtrend line at RM0.35. Yesterday, it broke above its strong horizontal resistance at RM0.80. Its next resistance is at RM1.00.
Mieco's uptrend reflects the improvement in the sector, which has first lifted the share price of Heveaboard. Evergreen and Mieco are the laggards in this sector and they are both playing catch-up.
Chart: Mieco's monthy chart as at July 6, 2015 (Source: ShareInvestor)
Conclusion
Based on bullish technical breakout, Mieco could be a good stock for trading BUY for now. Given the current uncertain market outlook, you should exercise careful discretion in all trading activity.
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, Mieco.
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