OFI: Earnings Rebounded Strongly

Background

Oriental Food Industries Holdings Bhd ('OFI') is a manufacturer of confectionery and snack foods. It was founded in 1978 and listed on the Second Board of Bursa Malaysia in 2000. Later it transferred its listing onto the Main Board. For more, go to the company's website. If you like to read a detailed analyst report available online, read JF Apex's report in 2017 here.

OFI's products

Recent Financial Performance

In QE31/12/2018, OFI's net profit rose 92% q-o-q or 54% y-o-y to RM5.1 million while revenue rose 10% q-o-q or 8% y-o-y to RM81 million. The increase in revenue was attributed to increase in both local and export sales. Profit before tax for the current quarter is higher due to lower cost of sales and higher gross profit margin.


Table: OFI's's last 8 quarterly results


Graph: OFI's last 22 quarterly results

Financial Position

As at 31/12/2018, OFI's financial position is deemed very hea;thy with current ratio at 2.3 times and gearing ratio at 0.4 time only.

Valuation

OFI (closed at RM0.72 yesterday) is now trading at a PE of 15 times (based on last 4 quarters' EPS of 4.7 sen). Based on this, OFI is deemed fairly valued.

Technical Outlook

OFI dropped from a high of RM2.50 in August 2016 to a recent low of RM0.65. The stock is still trying to form a base for the recovery.


Chart: OFI's weekly chart as at Feb 21, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance, OFI is a good stock for long-term investment in view of its healthy financial position and fair valuation.

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.