MBL: Revenue & Earnings Rose Due to Edible Oil Business

Recent Financial results

In QE30/6/2016, MBL's net profit increased by 8% q-o-q or 107% y-o-y to RM2.8 million while revenue increased by 108% q-o-q or 242% y-o-y to RM49 million. Revenue increased q-o-q driven by higher project sales in the manufacturing division and additional revenue from edible oil milling activities. PBT increased 36% q-o-q to RM3.96 million due mainly to profit contributed by the edible oil milling division.


Table: MBL's last 8 quarterly results


Chart 1: MBL's last 28 quarterly results

In an article in the Edge (here, via stockhut.com) MBL has indicated that it would be venturing downstream this year. The edible oil business is the result of that strategy. In 2015, it had also ventured upstream by acquiring 51%-stake in PT Serdang Jaya Perdana for RM4.7 million. PT Serdang Jaya Perdana is involved in upstream industry of palm kernel oil processing and manufacturing. Given the scant details on the edible oil business, I think that business is part of the business of PT Serdang Jaya Perdana.

In the same article, MBL's CEO Chua said that the company may consider rewarding the shareholders after the disposal of oil palm plantation company, Sokor Gemilang Ladang Sdn Bhd for RM35 million. The reward may come in the form of higher dividend, bonus issue or share buyback. Todate, we have only seen the latter where share buybacks - which started in May 2015 - have lead to a Treasury share balance of 730,200 units in hand.

Valuation

MBL (closed at RM1.02 on Tuesday) is now trading at a trailing PE of 11 times (based on last 4 quarters' EPS of 9.16 sen). At this multiple, MBL is deemed fairly attractive.

Technical Outlook

MBL appears to have broken above its intermediate downtrend line, RR at  RM1.00. MACD is rising nicely in positive territory.


Chart 2: MBL's weekly chart as at Aug 30, 2016 (Source: Shareinvestor.com)

Will the current upside breakout of the downtrend line be the repeat of what we saw in February 2012? Let's wait & see.


Chart 3: MBL's monthly chart as at Aug 30, 2016 (Source: Shareinvestor.com)

Conclusion

Based on good financial performance, fair valuation & bullish technical outlook, MBL could again be a good stock for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision