NTPM: Higher earnings on lower revenue

Result Update

For QE31/7/2020, NTPM's net profit rose 259% q-o-q or 28-fold y-o-y to RM14.6 million while revenue dropped by 11%  q-o-q or 3% y-o-y to RM179 million. Group revenue dropped y-o-y due to the decrease in sales of Tissue paper products. The Group’s PBT increased 527% y-o-y mainly due to the lower raw material cost and overhead cost. The key factors that affect the performance of tissue products include the lower cost in raw material consumed such as virgin pulp and waste paper.

 
Table: NTPM's last 8 quarterly results


Graph: NTPM's last 55 quarterly results

Financial Position

NTPM's financial position as at 31//7/2020 is deemed adequate with current ratio at 0.96 time and total liabilities to total equity at 1.17 times.

Valuation

NTPM (closed at RM0.63 yesterday) is now trading  at a PE of 33.5 times (based on last 4 quarters' EPS of 1.88 sen). At this PER, NTPM is deemed overvalued.

Technical Outlook

NTPM broke above its long-term downtrend line, RR at RM0.40 in September 2019. Due to the sharp selldown in March, the stock revisited the downtrend line again at RM0.32. The 50-week SMA line could be a good support if NTPM share price comes under selling pressure. The breakout of the downtrend line, coupled with the recent upward movement, means that the worst is behind the stock and better days may be here.


Chart 2: NTPM's weekly chart as at Sep 28, 2020 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance and mildly bullish technical outlook, NTPM could be a good stock for recovery play. Its upside potential is still limited due to demanding 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.
 

SCGM: Earnings Grew Strongly

Results Update

In QE31/7/2020 (1Q2021), SCGM's net profit rose 20% q-o-q or 276% y-o-y to RM8.3 million while revenue increased 15% q-o-q or 3% y-o-y to RM57 million. The group revenue rose q-o-q due to increase its manpower to 100% from May 2020 onwards under the Conditional Movement Control Order (CMCO), compared to 50% manpower during the Movement Control Order (MCO) from March to April2020. Also, the Group commenced production of face masks in May 2020, which contributed positively to 1Q2021 revenue. The Group recorded 47.8% q-o-q increase in PBT, which is attributable to improved sales mix, lower resin costs and lower interest expense. In line with the increased revenue, the Group noted 20% q-o-q increase in NP, due to the partial utilization of unutilized reinvestment allowance brought forward from prior year, and partial recognition of deferred tax asset on unabsorbed reinvestment allowance previously not recognized.

 
Table: SCGM's last 8 quarterly results

 
Graph: SCGM's last 45 quarterly results

Financial Position

SCGM's financial position is deemed healthy with current ratio at 1.45 times while gearing ratio is elevated at 0.71 time.

Valuation

SCGM (closed at RM3.59 yesterday) is now trading at a PE of 30X (based on the last 4 quarters' EPS of 12.11 sen).  At this PE, SCGM is deemed fully valued.

Technical Outlook

Recently, SCGM broke above its high of RM3.35-3.40 recorded in 2017, and went to a high of RM3.95. 


Chart: SCGM's weekly chart as at Sep 28, 2020 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance, healthy financial position & bullish technical outlook, SCGM is a good stock for long-term investment. However its upside potential may be limited due to its demanding 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.
 

Topglov: Exceptional Earnings in an Extraordinary Time

Result Update

On 17 September 2020 (last Thursday), Topglove announced a fantastic set of result for QE31/8/2020, where its revenue increased 161% due to "tremendous growth stemmed from a global surge in demand for gloves on the back of the COVID-19 pandemic". At the same time, its "Profit Before Tax and Profit After Tax surged by 2,095% to RM1.62 billion and 1,692% to RM1.33 billion respectively. Meanwhile, Sales Volume grew by 43% versus 4QFY2019".  

"Reflecting market demand, average selling prices (ASPs) were also adjusted upwards. The Group’s improved profit was also attributed to productivity enhancements which it continued to embark on, while the Group’s utilization levels which remained at close to 100% amplified production efficiency and reaped superior economies of scale. High utilization helped lower overheads significantly, notably the cost of labor and natural gas. Further contributing to the phenomenal results was Aspion with a Profit Before Tax of RM139.9 million, as the Group started to reap the fruits of its acquisition. The additional capacity provided also helped position Top Glove to meet the upturn in glove demand".

 
Table: Topglov's last 8 quarterly results

Like Supermx's result for QE30/6/2020 (here), Topglov's profit margins soared 3-4 folds. This extraordinarily high profit margins is not something that the company would want to trumpet about, probably because it would cause concern among its investors about profit normalization! 

Graph: Topglov's last 72 quarterly results

Business Outlook

Topglov's press release provides some guidance on its bullish outlook in the months ahead. To wit:

The outlook for the company and glove industry remains very promising. With COVID-19, Top Glove estimates that glove demand will grow by 20% per annum in 2020, 25% in 2021 and 15% post-COVID.

The Group’s monthly order book has seen a significant rise of about 150% from pre-COVID days while lead time (delivery) has gone up from about 40 days to as much as about 400 days presently. The exceptionally strong demand coupled with higher ASPs bodes well for the Group’s results in the coming quarters.

Valuation

Topglov (closed at RM8.00 yesterday) is now trading at a trailing PE of 34 times (based on last 4 quarters' EPS of 23.44 sen). At this PE ratio - which is comparable to the multiple assigned by the market in 2019 - investors' perception on Topglov's future earnings is finely balanced between the anticipation for continued sales growth and the concern for the impending sales price (and profit margin) normalization. One of the reason for the scale-down of bullishness in the glove sector is undoubtedly the much-anticipated availability of vaccines for Covid-19 as early as the end of the year.

Technical Outlook

Topglov has peaked at RM9.76 in early August, and then it dropped below its intermediate uptrend line (SS) at RM8.70. A downtrend line (RR) can be drawn on the chart, which will provide resistance to cap any strong rally in weeks or months ahead.

Chart 1: Topglov's weekly chart as at Sep 22, 2020_12.30 (Source: Malaysiastock.biz)


Chart 2: Topglov's semi-log weekly chart as at Sep 22, 2020_11.30 (Source: Malaysiastock.biz)

As noted at the start, Topglov announced its result for QE31/8/2020 on 17 September 2020 (during the lunch break). What happened after the fantastic result was announced was something unexpected- the share price dropped sharply! It should be noted that after Supermx announced its equally fantastic result for QE30/6/2020 on 10 August 2020 (after the market close), its share price opened at higher at RM12.18 the following day and immediately corrected for the next 5 business days to close at RM8.34 on 17 August 2020. We have also observed immediate correction after the announcement of bonus issues for both Supermx and Topglov. These corrections, which followed after the announcement of good news, seem to suggest that there are big sellers waiting to sell into strength for both stocks. Until these sellers have cleared their position, the near term outlook for these stocks is likely to be mildly bearish.

Chart 3: Topglov's 15-min chart as at Sep 22, 2020_11.30 (Source: Malaysiastock.biz)

Conclusion

Based on outstanding financial performance, fairly attractive valuation (on a historical basis) and continued strong demand for its products (due to the persistent rise in Covid-19 cases), Topglov reminds a good stock for medium-term investment. The negative factors to be considered are the big sellers who may cap further rally in the share price and the anticipated arrival of vaccines for Covid-19.

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.