SUPERLN (7235) - Superlon Holdings Berhad: Earnings Stays Strong
Background
Superlon Holdings Berhad ('Suprtln') is involved in the design, test and manufacture of thermal insulation materials
mainly for the heating, ventilation, air-conditioning and refrigeration (“HVAC&R”)
industry and trading of HVAC&R parts and equipment.
Superlon's products & factory in Malaysia
Superlon's products & factory in Malaysia
Historical Financial Performance
Superln's financial performance rose exponentially in FY2015 & this year. We can see its annual revenue breaking above the RM70 million mark & its pre-tax profit breaking above the RM10 million in FY2015.
Chart 1: Superln's last 10 years' results
The year 2015 happens to be the year when our MYR weakened substantially. This has boosted Superln's sales in the international market as the company exports to about 50 countries. If USD-MYR were to retrace back to 3.50, it is likely that Superln's profit margin may drop from the existing 20% to 10%. Its net profit could then be about RM9-10 million. Until then, Superln could enjoy hefty profit or expand its markets overseas.
Chart 2: Superln's last 10 years' profit margins & USD-MYR exchange rate
Recent Financial Results
In QE31/7/2016 Superln's net profit rose by 63% q-o-q or 57% y-o-y to RM6 million while its revenue rose by 9% q-o-q or 16% y-o-y to RM26 million. Profit after tax rose q-o-q mainly due to higher gross margin & exchange gain.
Table: Superln's last 8 quarters' results
Chart 2: Superln's last 14 quarters' results
Financial Position
Superln's financial position as at 31/7/2016 is deemed healthy with current ratio at 3.7x and gearing ratio at 0.21x. Return on Equity was good at 20%.
ValuationSuperln's financial performance rose exponentially in FY2015 & this year. We can see its annual revenue breaking above the RM70 million mark & its pre-tax profit breaking above the RM10 million in FY2015.
Chart 1: Superln's last 10 years' results
The year 2015 happens to be the year when our MYR weakened substantially. This has boosted Superln's sales in the international market as the company exports to about 50 countries. If USD-MYR were to retrace back to 3.50, it is likely that Superln's profit margin may drop from the existing 20% to 10%. Its net profit could then be about RM9-10 million. Until then, Superln could enjoy hefty profit or expand its markets overseas.
Chart 2: Superln's last 10 years' profit margins & USD-MYR exchange rate
Recent Financial Results
In QE31/7/2016 Superln's net profit rose by 63% q-o-q or 57% y-o-y to RM6 million while its revenue rose by 9% q-o-q or 16% y-o-y to RM26 million. Profit after tax rose q-o-q mainly due to higher gross margin & exchange gain.
Table: Superln's last 8 quarters' results
Chart 2: Superln's last 14 quarters' results
Financial Position
Superln's financial position as at 31/7/2016 is deemed healthy with current ratio at 3.7x and gearing ratio at 0.21x. Return on Equity was good at 20%.
Superln (closed at RM2.38 yesterday) is now trading at a trailing PER of 10x (based on last 4 quarters' EPS of 23.75 sen). For medium-cap stock, the PER is deemed fairly attractive. Dividend receivable rose from 6 sen in FY2015 to 9 sen in FY2016. 1Q2017 dividend receivable rose from 2 sen last year to 2.5 sen. Assuming dividend receivable is 9 sen, the stock has a DY of 3.8%.
Technical Outlook
Superln broke above the line connecting its recent peaks, AB at RM2.38 last Friday. After the upside breakout, the share price corrected back to the AB support at RM2.38. If this support can sustain, the stock may continue to go higher from hereon.
Chart 3: Superln's weekly chart as at Sep 27, 2016 9Source: Shareinvestor.com)
Chart 4: Superln's monthly chart as at Sep 27, 2016 9Source: Shareinvestor.com)
Conclusion
Based on good financial performance, fairly attractive valuation & mildly bullish technical outlook, Superln could be a good stock for trading BUY.
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.
SUPERLN (7235) - Superlon Holdings Berhad: Earnings Stays Strong
http://nexttrade.blogspot.my/2016/09/superln-earnings-stays-strong.html
