TChong: Earnings Rebounded Strongly

Result Update

For QE31/12/2018, TChong's net profit rose 57% q-o-q to RM52 million while revenue dropped 26% q-o-q to RM1.17 billion. The group revenue dropped q-o-q due to lower revenue from the automotive division of RM1,140.7 million (-26.0% QoQ) which was due to lower sales in the absence of the “tax holiday” in Malaysia in the previous quarter. Nonetheless, the group EBITDA rose due to higher EBITDA from the automotive division of RM114.6 million (+29.3% QoQ) due to the favourable sales mix and improved margins.


Table: TChong's last 8 quarterly results

TChong's revenue, profits and profit margins appear to have turn the corner in the last few quarters.


Graph: TChong's last 49 quarterly results

Financial Position

As at 31/12/2018, TChong's financial position is deemed satisfactory with current ratio at 1.6 times and gearing ratio at 0.9 time.

Valuation

TChong (closed at RM1.48 yesterday) is now trading at a trailing PER of 9.5 times (based on last 4 quarters' EPS of 15.48 sen). At this PER, TChong is deemed fairly attractive for a turnaround stock.

Technical Outlook

TChong appears to be making a base at around RM1.40.


Chart: TChong's monthly chart as at Feb 25, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance and healthy financial position, TChong could be a good stock for recovery play.

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.