TIENWAH (7374) - Tienwah: Approaching the sweet spot
For QE31/12/2014, Tienwah reported a net loss of RM1.8 million due to lower revenue plus one-off sales rebate and retrenchment expenses totaling RM6.8 million. This is the second year that the company had carried out retrenchment exercise. In QE31/12/2014, Tienwah was impacted a provision of redundancy expenses of RM2.8 million for staff in a subsidiary.
Tienwah should be reporting its financial result for QE31/3/2015 in the middle of May. I believe that the bottom-line should be positive. Since the share price has dropped from RM2.70 in early 2014 to a base of RM1.85, this could be a good time to buy into this stock.
Table: Tienwah's last 8 quarterly results
Chart 1: Tienwah's last 32 quarterly results
Valuation
Tienwah (closed at RM1.86 yesterday) is trading at a PE of 10 times (based on my projected EPS 18 sen). At this PE, Tienwah is deemed fairly valued. However, Tienwah has a decent DY of 3.8% and trades at a PBR of 0.8 time. The decent DY makes it a good income stock while the PBR of 0.8 time gives the stock a reasonable margin of safety.
Technical Outlook
Tienwah has been in a gradual downtrend since the beginning of 2014. This downtrend has brought the share price down from a high of RM2.70 to a base of RM1.85.
Chart 1: Tienwah's daily chart as at April 22, 2015 (Source: Share Investors)
From the monthly chart, we can see that the stock is however in a long-term uptrend with support at RM1.70.
Chart 3: Tienwah's monthly chart as at April 22, 2015 (Source: Share Investors)
Conclusion
Based on strong technical support & reasonable valuation, Tienwah is still a good stock for long-term investment. Its poorer financial performance is a negative factor but the company is downsizing to achieve better result ahead.
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.
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