GHLSYS: Promising Growth Stock

Background
GHL Systems Berhad (‘GHLSYS’) is involved in developing and selling software programs, sale and rental of electronic data capture (EDC) equipment and its related software and services. Its busineses can be grouped into 3: Transaction Payment Acquisition, Shared Services & Solutions.

GHLSYS's 3 main businesses

Recent Financial Performance

GHLSYS's financial performance has improved tremendously in the past 2 years. Its PBT went above RM10 million in FY2014 and its revenue soared above the RM100 million mark. In FY2015, PBT rose 45% to RM16 million while revenue surpassed the RM200 million mark.


Chart 1: GHLSYS's last 14 years P&L

Recent Financial Performance

When we zoomed into the quarterly results, we can see that the big jump in its top-line and bottom-line happened in QE30/6/2014. That's when the group completed its acquisition of e-pay Asia. (Note: The acquisition of e-pay Asia, which was announced in October 2013, triggered an upside breakout of a triangle and the rally that ensued sent the share price to RM1.25-1.30 in 2015).


Table: GHLSYS's last 14 quarters P&L


Chart 2: GHLSYS's last 14 quarters P&L
 
Financial Position

GHLSYS's financial position as at 31/3/2016 is deemed healthy with current ratio at 2.6x and total liability to equity at 0.3x.

Valuation

GHLSYS (closed at RM0.835 yesterday) is now trading at a PER of 48x (based on last 4 quarters' EPS of 1.75 sen). Based on earnings CAGR of 55% over the past 2 years, PEG ratio is still below 1. Like MYEG, GHLSYS's valuation is deemed 'reasonable' for a growth stock.

Technical Outlook

As noted earlier, GHLSYS rallied to a high of RM1.25-1.30 in May 2015. Thereafter, it dropped back and broke its uptrend line, SS at RM0.90. The stock can expect strong support from the horizontal lines at RM0.70 & RN0.60.


Chart 2: GHLSYS's monthly chart as at May 31, 2016_12.30pm (Source: Shareinvestor.com)

Zooming into the weekly chart, we can see that the stock is trending lower in an irregular downward channel ('RR, R1R1"). Its immediate support will be the horizontal lines at RM0.70-0.73 & RM0.60.


Chart 3: GHLSYS's weekly chart as at May 31, 2016_12.30pm (Source: Shareinvestor.com)

Conclusion

Based on good financial performance & position and 'reasonable' valuation for a growth stock, GHLSYS could be a good stock for long-term investment. Slow accumulation should be the approach and that may begin at RM0.70 mark.

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, GHLSYS.

Asiafle: Sacrificing Sales For Margin!

Results Update

For QE31/3/2016, Asiafle's net profit dropped by 8% q-o-q to RM16.9 million on the back of a 1%-decline in revenue to RM97 million. Compared to the same quarter last year, net profit rose 31% while revenue was down 3%.

Revenue dropped slightly q-o-q as the company has become more selective in its marketing approach by focusing on sales which yield better margins. The lower sales plus forex loss of RM 0.3 million resulted in lower sequential profit.


Table: Asiafle's last 8 quarterly results


Chart 1: Asiafle's past 33 quarterly results
 
Valuation

Asiafle (at RM4.19 as at 2.35pm) is now trading at an attractive PER of 10.4 times (based on last 4 quarters' EPS of 40.13 sen). The stock pays a decent dividend yield of 3.8%.

Technical Outlook

From the monthly chart below, we can see that Asiafle has embarked on its second upleg since 2013. Its first upleg was from 1998 until 2009. In between, the stock had a mild downtrend from 2010 to 2012.


Chart 2: Asiafle's monthly chart as at May 31, 2016  (Source: Shareinvestor.com)

The present upleg may take the form of an upward channel, like the earlier upleg from 1998 to 2009. The share price is now in an intermediate downtrend which may terminate at around RM3.70-4.00.

 

Chart 3: Asiafle's weekly chart as at May 31, 2016  (Source: Shareinvestor.com)
 
Conclusion

Based on good financial performance, fairly attractive valuation & positive long-term technical outlook, Asiafle could be a good stock for long-term investment. Good entry level is at RM3.70-4.00.

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, Asiafle.

MYEG: A Steady Growth Stock

Background

My E.G. Services Bhd ('MYEG') provides E-Services between the Government and the people and businesses. Its services include electronic delivery of driver and vehicle registrations, licensing and summons services and utility bill payments. In the past 5-6 quarters, its new business - online renewal of foreign worker permits - has grown into a major business, contributing a sharp rise in its revenue & profits.

other businesses like the replacement of MyKad (the chip-based national identity card), paying Road Transport and police summonses, auto insurance, and road tax renewal, - See more at: http://www.themalaymailonline.com/tech-gadgets/article/facing-backlash-myeg-defends-deal-with-malaysian-government#sthash.OAhaHM9X.dpu
Recent Financial Performance

Recent Financial Performance

Over the past 5 quarters, MYEG's top-line and bottom-line have risen steadily. Earnings grew at a 85% in the last 4 quarters!


Table: MYEG's last 14 quarters' P&L


Chart 1: MYEG's last 14 quarters' P&L

Financial Position

MYEG's financial position as at 31/3/2016 is deemed healthy with current ratio at 2.2x and total liability to equity at 0.6x.

Valuation

MYEG (closed at RM2.05 yesterday) is now trading at a trailing PER of 42x (based on last 4 quarters' EPS of 4.8 sen). Based on CAGR of 60% over the past 2 years, PEG ratio is still below 1. Thus MYEG valuation is deemed 'reasonable' for a growth stock.

Technical Outlook

MYEG has been in a steady uptrend since it broke above the resistance from the horizontal line at RM0.23-0.24.


Chart 2: MYEG's monthly chart as at May 30, 2016 (Source: ShareInvestor)

During this uptrend, MYEG had 3 prolonged consolidation phases. The first was Jan-Aug 2014 & the second one was Mar-Oct 2015. It is currently in the 3rd consolidation phase. The 2nd consolidation phase was supported by the 40-week EMA line. If the same applies to the current consolidation, we can expect the share price to be supported at RM1.90-2.00. Continuation of the long-term uptrend will begin if the share price surpasses the recent high of RM2.30-2.35.


Chart 3: MYEG's weekly chart as at May 30, 2016 (Source: ShareInvestor)

Conclusion

Based on good financial performance & condition, "reasonable" valuation (supported by rapid growth) and positive technical outlook, MYEG could be a good stock for long-term investment. Good entry is at RM1.90-2.00.

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, MYEG.

Karex: Bottom-line dropped sharply

Background

Karex Berhad ('Karex') is involved in the manufacture and sales of condoms, lubricating jelly and other medical devices such as catheters and probe covers. It has 3 manufacturing facilities located in Pontian, Johor; Port Klang, Selangor; and, Hat Yai, Thailand. These facilities employ a workforce of 2,000 employees and can produce 4 billion pieces of condom per annum. This makes Karex the largest condom manufacturer in the world.

Recent Financial Performance

Karex's bottom-line has grown rapidly over the past 2 years due to steady growth in revenue & profit margin. In QE31/12/2015, its profit margin contracted sharply. The drop continued in the latest quarter. This profit margin compression, coupled with a drop in top-line, resulted in a sharp drop in its bottom-line in QE31/3/2016. The company explained that the net profit dropped q-o-q due to "lower sales, lower profit margin and foreign exchange losses in current quarter" as well as the absence of a "one-off gain from a bargain purchase of RM 4.7million". 


Table: Karex' last 10 quarters' P&L


Chart 1: Karex' last 10 quarters' P&L

Financial Position

Karex's financial position as at 31/3/2016 is deemed very healthy. Its current ratio stood at 7 X while total liabilities to equity stood at only 0.15 X.

Valuation

Karex (closed at RM2.32 last Friday) is now trading at a PER of 32x (based on last 4 quarters' EPS of 7.18 sen). Based on its rapid growth of 32%, its PEG ratio is at 1X. Thus, its high PER is considered acceptable in view of its high growth of 32%. However, the high PER means that it must continue to grow at the elevated rate of 32%. That's why investors should be asking this question: Is the recent drop in bottom-line a temporary setback or is it a transition to a lower growth rate? If it is the latter, we can expect investors to reduce their holding of this overvalued stock!

Technical Outlook

Karex is in a long-term uptrend line, SS with support at RM2.30. Its upside may be capped by a medium-term downtrend line, RR at RM2.50. A break below RM2.30 could signal the end of its uptrend while a break above RM2.50 would signal the continuation of its prior uptrend.


Chart 2: Karex's weekly chart as at May 27, 2016 (Source: ShareInvestor.com)

Conclusion

Based on weaker financial performance and possible overvaluation, it may be advisable to reduce your position on Karex. However, your selling can be carried out slowly since the technical outlook for the stock is still bullish.

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, Karex.

PIE: Earnings Plummeted

Result Update

For QE31/3/2016, PIE's net profit dropped 86% q-o-q or 79% y-o-y to RM2 million while revenue was mixed- dropped 54% q-o-q but rose 8% y-o-y to RM120 million. Revenue dropped 54% q-o-q due to lower  demand  for  electronics  manufacturing products and raw wire & cable products but partly offset with higher revenue achieved by wire harness activities. PBT dropped 93% q-o-q due to lower revenue achieved, lower margin of product mix and losses from foreign currency exchange transactions. However, the decrease in profit was partly offset by lower operating expenses and reversal of slow-moving inventories provision.


Table: PIE's last 8 quarterly results


Chart 1: PIE's last 32 quarterly results

Valuation

PIE (closed at RM13.14 last Friday) is now trading at a PE of 24 times (based on last 4 quarters' EPS of 53.4 sen). At this multiple, PIE is deemed overvalued.

This big rally over the past 7-8 months was not supported by any increase in earnings! If the rally was based on better prospects future or exciting new projects, the huge drop in earnings should give pause for thoughts to its shareholders.

Technical Outlook

PIE broke above the strong resistance at the horizontal line of RM7.00 in October 2015 and rallied to about RM14.00 today. PIE is resting on its 10-week SMA line. The only sign of weakness is the MACD crossing below its MACD signal line.


Chart 2: PIE's weekly chart as at May 27, 2016 (Source: Shareinvestorcom)
 

Chart 2: PIE's monthly chart as at May 27, 2016 (Source: Shareinvestor.com)

Conclusion

Based on weak financial performance & full valuation, I would rate PIE a SELL.

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, PIE.

LTKM: Earnings Plummeted

Results Update

In QE31/3/2016, LTKM's net profit plummeted  97% q-o-q or 99% y-o-y to a mere RM0.137 million while revenue was down 10% q-o-q or 19% y-o-y to RM40 million. Profits declined sharply q-o-q due to the fall in egg prices.


Table 1: LTKM's 8 quarterly result


Chart 3: LTKM's 38 quarterly results

Valuation

LTKM (closed at RM1.56 yesterday) is now trading at a high PER of 17 times (based on last 4 quarters' EPS of 9 sen). However, with a Price to Book ratio of 0.9X (based on NTA of RM1.71 as at 31/3/2016), LTKM's downside is well-cushioned.

Technical Outlook

LTKM has been moving sideways, leaning on its 30-month EMA line. I expect this line and the line connecting the trough in December 2014 & September 2015 (AB) to provide support for the stock.


Chart 4: LTKM's monthly chart as at May 27, 2016 (Source: ShareInvestor.com)

Conclusion

Based on poor financial performance, overvaluation & bearish technical outlook, LTKM is rated as a SELL.

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, LTKM.

Tunepro: Earnings Rose y-o-y

Results Update

For QE31/3/2016, Tunepro's net profit rose by 37% q-o-q to RM23 million on the back of a 16%-increase in revenue to RM130 million. Compared to the preceding quarter, net profit dropped 4% while revenue dropped 2%. Revenue dropped q-o-q by RM3.1 million due to decrease of RM3.7 million in investment income of general insurance, offset by increase of RM0.6 million in gross earned premium. PBT dropped mainly due to increase in marketing costs in relation to digital marketing campaign in line with the Group's vision on being a leading digital insurer and unrealized foreign exchange loss.


Table: Tunepro's last 8 quarterly results

While profits in the last quarter are weaker than the preceding quarter, the drop was minimal when compared to previous years. This - coupled with higher dividend (a reflection of management's confidence) - seems to suggest that the company could be on a growth path.


Chart 1: Tunepro's last 18 quarterly results

Valuation

Tunepro (closed at RM1.51 last Friday) is now trading at a PER of 15 times (based on last 4 quarters' EPS of 10.0 sen). At this PER, Tunepro is deemed fairly valued.

Technical Outlook

Tunepro broke above its downtrend line, RR at RM1.25 in late February. Tunepro has just surpassed the strong resistance from the horizontal line at RM1.50. With MACD above the zero line, uptrend will commence soon. The only thing lacking is the ADX is still below the 20-mark.


Chart 2: Tunepro's weekly chart as at May 27, 2016(Source: ShareInvestor.com) 

Conclusion

Based on improved financial performance, reasonable valuation & bullish technical outlook, Tunepro is 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, Tunepro.

Canone: Weaker Prices, Better Value

Results Update

In QE31/3/2016, Canone's net profit dropped 21% q-o-q or 27% y-o-y to RM11 million while revenue was mix- dropped by 13% q-o-q but rose 7% y-o-y to RM205 million. PBT dropped 16% y-o-y due to lower share of profit from associate, Kianjoo which had more than offset the increased PBT from the Food Products division which was due to higher sales, favourable product mix and favourable dairy commodity prices.


Table 1: Canone's last 8 quarterly results


Table 2: Canone's segmental performance for QE31/3/2016 & QE31/3/2015


Chart 1: Canone's last 37 quarterly P&L results

Financial Position

Canone's financial position is mixed. Its liquidity position is healthy with current ratio at 1.3X. Its leverage position is a concern, with total liability to equity at 1.0X and total debts to equity of 0.8X. Its proposed disposal of a 30% stake in F&B Nutrition Sdn Bhd to KWAP for RM280 million could help. Alternatively, the company could raise funds through a Rights Issue which may be a bit hard to swallow in this difficult time.

Valuation

Canone (closed at RM3.63 yesterday) is now trading at a PER of 8.6X (based on last 4 quarters' EPS of 42 sen). At this PER, Canone is deemed fairly attractive.

Technical Outlook

Canone had a short-lived rally after it announced the proposed sale of a stake in F&B Nutrition Sdn Bhd. Since then, the share price has dropped back sharply. It may find support at the current price from the horizontal line at RM3.60-3.70. As long as the share price remains above RM2.80-3.00, Canone is likely to be in an uptrend.


Chart 2: Canone's monthly chart as at May 25, 2016 (Source: ShareInvestor.com)
 
Conclusion

Based on satisfactory financial performance, attractive valuation & potential windfall from a possible sale of a 30%-stake in F&B Nutrition, Canone 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, Canone.

Annjoo: Returned to the Black

Results Update

For QE31/3/2016, Annjoo's net profit rose 3.7% y-o-y to RM5.5 million on the back of a 6%-decline in revenue to RM490 million. Annjoo returned to the black after 4 quarters of losses that was punctuated by a quarter of profit in QE31/3/2015. Revenue increased q-o-q mainly contributed by a broad recovery in steel prices coupled with higher sales tonnage of both Manufacturing and Trading divisions. The Group posted a PBT of RM7.40 million as compared to loss before tax (“LBT”) of RM47.96 million previously, attributable to recovery in selling prices hence a reversal of inventories written down to net realizable value of RM18.47 million in current quarter as compared to RM3.71 million in the preceding quarter. Thus, we can see that if the reversal was not booked in the account, Annjoo remained in the red, with loss before tax of about RM11 million.


Table 1: Annjoo's last 8 quarterly results


Chart 1: Annjoo's last 41 quarterly results

Valuation

Annjoo (closed at RM1.03 yesterday) is now trading at a Price/Book Value of 0.55X (based on NTA of RM1.86 p.s.). With losses per share of 27 sen for the past 4 quarters. Annjoo has a negative PER. (Note: Annjoo was trading at RM0.995 as at 4.00pm).

Industrial Outlook

I had posted about the sharp recovery in iron ore price in March. Alas, iron ore prices have since dropped the level in March. This means the recovery in the steel sector has not yet started. 



Chart 2: Iron Ore 1-year price chart as at May 2016 (Source: Business Insider)

Technical Outlook

Annjoo rallied after it broke above the downtrend line, RR at RM0.65 in early March. Right now, the stock is hanging onto the psychological RM1.00 mark.


Chart 3: Annjoo's monthly chart as at May 25, 2016_4.00pm (Source: ShareInvestor.com)

Conclusion

Based on challenging outlook in the steel sector and continued poor financial performance, I think it is a good idea to take some profit on your investment in Annjoo.

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, Annjoo.

Harbour: Earnings Stayed Healthy

Result Update

For QE31/3/2016, Harbour's net profit increased by 5% q-o-q or 24% y-o-y to RM15.3 million while its revenue increased by 33% q-o-q or 44% y-o-y to RM182 million. Revenue & profits increased q-o-q due mainly to higher revenue & profits from the property development segment.

The current property development project undertaken by Harbour is known as the Kidurong Gateway. It is being carried out by a 51%-owned subsidiary, Arcadia Properties Sdn Bhd. Kidurong Gateway will be developed in the commercial hub of the Bintulu industrial area. The development will be divided into 4 phases covering 125.5 acres. Todate only 2 phases (covering only 22.2 acres) had been launched. The response has been encouraging.


Table 1: Harbour's last 8 quarterly results


Diagram: Harbour's segmental results for 9-month ended 31/3/2016 & 31/3/2015


Chart 1: Harbour's last 35 quarterly results

Valuation

Harbour (closed at RM1.08 yesterday) is now trading at a PE of 4 times (based on last 4 quarters' EPS of 26.02 sen). At this PER, Harbour is deemed attractively  valued. 

Technical Outlook

Harbour has been in a gradual uptrend since 2007. That uptrend accelerated in 2014 after its quarterly net profit broke above the RM10 million mark for the first time in QE30/6/2014. Since then, it has two big moves (in early 2014 & early 2015) which were followed by a long period of consolidation. We are now in the 2nd consolidation. While the stock is now trading below the tentative uptrend line at RM1.20, the share price may be supported by the 20-month EMA line at RM1.07-1.08. f the 20-m EMA line is breached, the share price may slide to the RM1.00 psychological level. 


Chart 2: Harbour's monthly chart as at May 24, 2016 (Source: Share Investor)

Conclusion

Based on good financial performance and attractive valuation, I would maintain my rating for Harbour as a BUY. The only concern now is technical; the breakdown of the tentative uptrend line but that's offset by possible support from the 20-m EMA line.

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, Harbour.

Aji: Weaker Earnings But Bigger Dividend

Result Update

For QE31/3/20165, Aji's net profit dropped 42% q-o-q on the back of a 9.7%-increase in revenue to RM110 million. Compared to the same quarter last year, net profit rose 16% while revenue rose 36%.

Revenue increased y-o-y due to higher domestic sales in Umami and Food & Seasoning segments. The domestic sales in corresponding quarter last year were exceptionally low due to market concerns on Goods and Services Tax implementation. Operating profit rose from RM7.4 million to RM9.2 million due to better margin from export sales arising from the appreciation of the USD.

The unusual drop in net profit q-o-q on the back of higher revenue was due to a sharp drop in operating profit margin from 14.8% to 8.3%. The notes to the account did not explain why this happened. My guess is that Aji was hit by a double whammy in the form of low selling prices revenue due to stronger MYR but higher input cost as its inventory was purchased higher when USD was stronger.


Table: Aji's last 8 quarterly results


Chart 1: Aji's last 43 quarterly results

Valuation

Aji (closed at RM13.28 yesterday) is now trading at a PE of 19.8 times (based on last 4 quarters' EPS of 67.1 sen). At this PER, Aji is deemed fairly valued. To reward its shareholders, Aji has declared a big dividend of 33.75 sen. This will push up its DY to 2.5%.

Technical Outlook

Aji is in a strong uptrend after my last post in 2015. The  stock is a bit stretched after the 30%-gain since late April. Thus I am not surprised if there is a short-term correction in the share price.


Chart 2: Aji's weekly chart as at May 24, 2016 (Source: ShareInvestor.com)


Chart 3: Aji's monthly chart as at May 24, 2016 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance & positive technical outlook, AJI is a good stock for long-term investment. Some profit-taking at this stage may be a good idea.

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, AJI.

Sign: Poorer Earnings (UPDATED)

Results Update
For QE31/3/2016, Sign's net profit dropped 11% q-o-q or 63% y-o-y to RM5.0 million while revenue dropped by 0.5% q-o-q or 38% y-o-y to RM55 million. Revenue dropped q-o-q as a result  of lower project revenue recognized from Kitchen & Wardrobe segment. PBT dropped 13% q-o-q mainly due to lower project profits recognized.

Table: Sign's last 8 quarterly results (Adjusted for a share split of 1-to-2 done in April 2016)

 
Chart 1: Sign's last 33 quarterly results

Financial Position

As at 31/3/2016, Sign's financial position is deemed adequate. Current ratio stood at 1.9X while total liabilities to equity stood at 0.8x. Receivable increased from RM71 million to RM119 million but its debtors' collection period improved from 172 days to 150 days.

Valuation

Sign (closed at RM1.11 yesterday) is now trading at a trailing PE of 13.7 6.9 times (based on last 4 quarters' EPS of 8.1 16.2 sen). At this PER, Sign is deemed fairly attractively valued.

(Note: The post is updated to account for the share split of 1-to-2 carried out after the latest quarterly report).

Technical Outlook

Sign broke below its uptrend line, SS at RM1.10 in August last year (see Chart 2). Since then it has been moving within a downward channel (see Chart 3). 3 weeks ago, Sign showed signs of recovery. Its weekly MACD has almost gone above the zero line while ADX has gone above the 20-mark. Sign looks poised for its next upleg.


Chart 2: Sign's monthly chart as at May 24, 2016_10.00am (Source: ShareInvestor.com)


Chart 3: Sign's weekly chart as at May 24, 2016_10.00am (Source: ShareInvestor.com)

Conclusion

Based on satisfactory financial performance & position, fairly attractive valuation and mildly bullish technical outlook, Sign's rating is revised from a SELL to a HOLD BUY (a slow 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, Sign.

Market Outlook as at May 23, 2016

Over the past 6 weeks, FBMKLCI dropped about 100 points from 1720 to about 1620. In the process, FBMKLCI has broken below the 40-week EMA line & gone back into its irregular downward channel. Indicators are pointedly negative, such as MACD going into the negative territory and ADX crossing above the 20 mark. Like the period of June-July 2015, the index would rely on the next psychological support to stay afloat. Failure to stay above the 1600 psychological level now could bring on a sharp sell-off similar to what we saw in August 2015.


Chart 1: FBMKLCI's weekly chart as at May 23, 2016_12.30pm (Source: ShareInvestor.com)

DJIA has made a temporary top. We can see that 20-day SMA line has just crossed below the 40-day SMA line while MACD has gone into the negative territory. Unless a strong rebound happens quickly, DJIA could continue to slide to the 16000 psychological level again. This could trigger a global sell-off - coinciding with a similar sell-off in Bursa Malaysia.


Chart 2: DJIA's daily chart as at May 20, 2016 (Source: Stockcharts)

Based on the bearish outlook for FBMKLCI and the US markets, we should reduce our trading activities over the next few weeks.

Liihen: An Attractive Growth Stock

Background

Lii Hen Industries Bhd ('Liihen') is involved in the manufacture of furniture, and processing and kiln drying of rubber wood and timber. For the company profile, go here.

Recent Financial Performance

Liihen's revenue has been trending higher for the past 3 years. In QE31/3/2016, revenue hit a high of RM165 million.

Its net profit has been making new high for the past 5 quarters. In QE31/3/2016, the company recorded a net profit of RM21 million.


Table: Liihen's last 14 quarterly results


Chart 1: Liihen's last 14 quarterly results

Financial Position

As at 31/3/2016, Liihen's financial position is deemed very healthy with current ratio at 2.6X and total liabilities to equity of 0.4X. The company has net cash of RM82 million or 45 sen per share.

Valuation

Liihen (closed at RM2.51 last Friday) is now trading at a trailing PER of 6.7X (based on last 4 quarters' EPS of 37.48 sen). If the net cash is deducted from the share price, then the trailing PER would be lowered to 5.5X. It paid total dividend of 16.5 sen last year (including a special dividend of 6 sen). That gives a dividend yield of 6.6% (or 4.2% after excluding the special dividend). The PER & DY numbers show Liihen to be an attractive stock.

Technical Outlook

Liihen has been in an intermediate downtrend from November last year to March this year. The stock has broken above its downtrend and is now poised to continue its uptrend. A break above the horizontal line of RM2.55 could signal the start of this uptrend continuation.


Chart 2: Liihen's weekly chart as at May 20, 2016 (Source: Shareinvestor.com)


Chart 3: Liihen's daily chart as at May 20, 2016 (Source: Shareinvestor.com)

Conclusion

Based on good financial performance, healthy financial position, attractive valuation & bullish technical outlook, Liihen is a good stock to consider 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, Liihen.