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.