Kianjoo: Earnings Dropped Sharply

Result Update

For QE30/6/2018, Kianjoo's net profit dropped by 60% q-o-q or 70% y-o-y to RM4.6 million while revenue dropped by 4% q-o-q or 3% y-o-y to RM429 million. Revenue dropped y-o-y due to decrease in demand for some of the Group's products and offset by upward adjustments of selling price to absorb the increase in cost of direct material. Gross profit declined to RM43.9 million from RM61.2 million in QE30/6/2017 due to decrease in revenue and increased cost of tin plate, aluminium and paper rolls. Consequently, profit before tax decreased to RM5.2 million from RM18.9 million in QE30/6/2017. During the quarter, the Group incurred pre-operating loss of RM3.4 million from a new cartons factory in Myanmar- which is expected to incur losses in the remaining quarter of the year due to pre-operating cost incurred.


Table: Kianjoo's last 8 quarterly results


Graph: Kianjoo's last 47 quarterly results

Financial Position

As at 30/6/2018, Kianjoo's financial position is deemed satisfactory with current ratio at 1.6 times and gearing ratio at 0.7 times.

Valuation

Kianjoo (closed at RM2.62 last Tuesday) is now trading at a PE of 16 times (based on last 4 quarters' EPS of 16.3 sen). At this multiple, Kianjoo is deemed fairly valued.

Technical Outlook

Kianjoo broke its long-term uptrend line, SS at RM3.10 in June 2016. Since then, it has been drifting lower. Its immediate support is at RM2.50 and the next support will be at RM2.10.


Chart 1: Kianjoo's monthly chart as at Aug 21, 2018 (Source: Shareinvestor.com)



Chart 2: Kianjoo's weekly chart as at Aug 21, 2018 (Source: Shareinvestor.com)

Conclusion

Based on continued weaker financial performance and full valuation, I revise my rating for Kianjoo a HOLD to REDUCE.

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.