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.

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