Tienwah: Weaker Earnings on Lower Sales

Result Update

For QE31/3/2016, Tienwah's net profit dropped 52% q-o-q but rose 168% y-o-y to RM5.6 million while revenue declined by 15% q-o-q or 6% y-o-y to RM82 million. Tienwah's PBT dropped q-o-q mainly due to lower sales & the absence of a one-off gain of RM2.1 million on disposal of 50% in TVP. Sales dropped due to changes in pricing of some products to a major customer and the impact of TVP's operation being de-consolidated from 31//12/2015 as a subsidiary to a JV entity. This was partially offset by sales to a new multinational tobacco company customer.


Table: Tienwah's last 8 quarterly results

Despite the sharp drop in Tienwah's top-line - due to the 2 reasons given above - I believe that this level is likely to be maintained and earnings could possibly rebound a bit.


Chart 1: Tienwah's last 37 quarterly results

Valuation

Tienwah (closed at RM2.37 yesterday) is trading at a trailing PE of 6.1 times (based on the last 4 quarters' EPS 38.86 sen). If the one-off improvement due to depreciation reduction (a result of change in useful life duration amounted to RM2.1 million, booked in in QE30/9/2015) and the gain of RM2.1 million on disposal of 50% of TVP (in QE31/3/2016), the rolling EPS would drop to 34.5 sen & the trailing PER would rise to 6.9 times. At these multiples, Tienwah's valuation is deemed fairly attractive.

Technical Outlook

Tienwah is trading very near to the horizontal line of RM2.30. If it can surpass the downtrend line, RR at RM2.50, it may begin its next upleg.


Chart 2: Tienwah's weekly chart as at Apr 27, 2016( (Source: Share Investors)

From the monthly chart below, we can see that Tienwah is in an upward channel, with resistance at RM3.00 & support at RM1.70. The stock is not likely to test either resistance or support anytime soon. Its immediate support is the above horizontal line at RM2.30 which happens to be the area where 10-month SMA & 20 & 30-month EMA lines converged. This maybe a good entry level for the stock.

 
Chart 3: Tienwah's monthly chart as at Apr 27, 2016((Source: ShareInvestors) 

Conclusion

Based on improved financial performance and fairly attractive valuation, Tienwah is a good stock for long-term investment.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Tienwah.

Tienwah: Earning roared back

Result Update

For QE30/9/2015, Tienwah's net profit rose 166% q-o-q or 298% y-o-y to RM14.6 million while revenue rose by 11% q-o-q or 8% y-o-y to RM96 million. Tienwah's bottom-line roared back due to higher revenue, increased in the share of profits of an associate and lower depreciation charge. The latter was due to revision of the useful life of its plant & machinery which resulted in a RM3.2 million reduction in  the depreciation charge in the current quarter; of  which RM2.1million related to adjustments from 1 January 2015 to 30 June 2015.


Table: Tienwah's last 8 quarterly results

Below I present the chart of Tienwah's P&L & profit margins for the past 35 quarters. The 2 charts on the left are unadjusted while the 2 charts on the right are adjusted for changes in depreciation. You can see that the adjusted charts do not take away too much from what is a substantial improvement in Tienwah's performance, both top-line & bottom-line.


Chart 1: Tienwah's last 35 quarterly results

Valuation

Tienwah (closed at RM1.82 yesterday) is trading at a trailing PE of 7.6 times (based on the last 4 quarters' my projected EPS 23.8 sen). If the one-off improvement due to depreciation reduction (a result of change in useful life duration), the rolling EPS would drop to 21.0 sen & the trailing PER would rise to 8.7 times. At these multiples, Tienwah's valuation is deemed attractive.

Technical Outlook

As noted earlier, Tienwah has broken above its intermediate downtrend line, RR at RM1.70 about 2 weeks back (see Chart 2). With this breakout, Tienwah could well have found its bottom. Recovery may come if earning returned. It may have returned!


Chart 2: Tienwah's weekly chart as at Nov 11, 2015 (Source: Share Investors)

From the monthly chart below, we can see that the stock has rebounded after testing its long-term uptrend, SS.

 
Chart 3: Tienwah's monthly chart as at Nov 11, 2015 ((Source: Share Investors) 

Conclusion

Based on improved financial performance, attractive valuation & positive technical outlook, Tienwah is a good stock for long-term investment.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Tienwah.

Tienwah: Recovery may begin

 In May, I have noted that Tienwah's bottom-line had worsened. Nonetheless I maintained my view that the stock is at a level that one can begin slow accumulation. That's consistent with my April post where I noted that the sweet spot to buy was nearing. See Chart 1.

 
Chart 1: Tienwah's monthly chart as at Nov 4, 2015_3.00pm (Source: Share Investors) 
 
I just discovered that the stock has broken above its intermediate downtrend line. See Chart 2. This may not be the begin of the next upleg but it is a confirmation of a bottom. In the event of weakness ahead, you can accumulate more of the stock at RM1.65-1.75.


Chart 2: Tienwah's weekly chart as at Nov 4, 2015_3.00pm (Source: Share Investors) 

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Tienwah.