HIAPTEK: Earnings Remained Strong

Results Update

For QE30/4/2021, Hiaptek's net profit rose 117% q-o-q or 12-fold to RM66 million while revenue was mixed- down 7% q-o-q but up 100% y-o-y to RM330 million. Its revenue decreased by 7% q-o-q due to lower sales volume for both the Trading and Manufacturing divisions attributable to the Chinese New Year holidays in February 2021. Despite the lower revenue, Profit from Operations increased by 67% to RM63.53 million due to higher steel prices and cost optimization efforts undertaken during the quarter under review. "Together with an improved contribution from the JV entity of RM19.81 million in the current quarter as compared to RM2.88 million in the immediate preceding quarter, the Group recorded a 114% improvement in Profit before Tax to RM80.16 million in 3Q2021 as compared to RM37.42 million in 2Q2021". 

The company is positive on its outlook, post lockdown, given the strength of steel prices and the JV entity’s continuous investments in plant and equipment to achieve cost efficiencies. The JV entity’s first 200,000 tonnes of coke oven plant is expected to complete by the second half of 2021, in which substantial cost savings can be achieved. For more, go here.

Table: Hiaptek's last 8 quarterly results


Graph: Hiaptek's last 70 quarterly results

Financial Position

Hiaptek's financial position as at 30/4/2021 is deemed satisfactory with current ratio at 1.63 times and gearing ratio at 0.49 time. 

Valuation

Hiaptek (closed at RM0.565 yesterday) is now trading at a PE of 6.8 times (based on last 4 quarters' EPS of 8.29 sen). At this PE ratio, Hiaptek is deemed fairly attractive.

Technical Outlook

Hiaptek has broken above its long0term downtrend line at RM0.20 in September 2020.

 
Chart 1: Hiaptek's monthly chart as at Jun 29, 2021 (Source: Kenanga BTX)

Hiaptek then rallied to a high of RM0.70 in May 2021. Like other steel stocks, Hiaptek has corrected substantially in the past few weeks. However it is still in an uptrend line with support at RM0.52. 


Chart 2: Hiaptek's weekly chart as at Jun 29, 2021 (Source: Kenanga BTX)

Conclusion

Based on improved financial performance & financial position, reasonable valuation and mildly bullish technical outlook, Hiaptek is a good stock for medium-term investment.

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.