Teoseng: Egg Prices Started to Decline

Result Update

In QE31/12/2018, Teoseng's net profit rose 146% q-o-q or 35% y-o-y to RM17 million while revenue rose 18% q-o-q or 25% y-o-y to RM147 million. The revenue increased by RM22.0 million representing 17.5% higher mainly due to the stable selling price of eggs and higher sales quantity.Due to higher revenue and better efficiency, the Group recorded a pre-tax profit of RM24.8 million representing an increase of 188%. The latest result was announced on 20 February.


Table: Teoseng's 8 quarterly result


Graph: Teoseng's 25 quarterly result

Egg prices began to slide in the last week of March. The decline accelerated in April. If this continued, we may see average egg prices dropping to 25-28 sen apiece.


Graph 2: Egg Average Price Chart as at April 5, 2019 (Source: DVS. gov.my)

Latest Financial Position

As at 31/12/2018, Teoseng's financial position is adeqaute, with current ratio of 1.11x and gearing ratio of 0.57x.

Valuation

Teoseng (closed at RM1.22 last Friday) is now trading at a trailing PER of 12 times (based on last 4 quarters' EPS of 10.12 sen). Based on this PER, Teoseng is fairly valued.

Technical Outlook

Teoseng broke above its long-term downtrend, RR at RM0.92 in December 2018.


Chart 1: Teoseng's weekly chart as at Apr 5, 2019 (Source: Malaysiastock.biz)

After the breakout of the downtrend line, Teoseng began its uptrend and hit a high of RM1.37. This upswing is supported by the short-term uptrend line, SS at RM1.18.


Chart 2: Teoseng's daily chart as at Apr 5, 2019 (Source: Malaysiastock.biz)

Conclusion

Despite improved financial performance and bullish technical outlook, Teoseng's rally is dependent on the outlook for egg prices. The current drop in egg prices could lead to lower revenue and profits in the near future. Thus, it may be a good idea to take some profit on this stock.

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.