10 Stocks to Watch based on 4Q16 Report Card

For every quarter, STOCKIFY would shortlist stocks based on the latest report card. In this post, we would list out 10 stocks to watch based on 4Q16 report card, and review 3 stocks covered previously (including results announced from Dec 2016 to Feb 2017)

To watch:

1) COCOLND

COCOLND, the manufacturer of the popular LOT100 gummy candy, has posted 60% surge on their net profit to 16.9 mil in FY16 Q4 report. The main contribution of this improvement is due to the increasing sales of higher sales of gummy products, and gain on favourable foreign currencies exchange. The company has continued to maintain its net cash and debtless position in the latest financial report. The management has also declared dividend payout of 10 sen, which gives dividend yield of 4% at current price.

2) CSCSTEL

The Company’s operating divisions include cold rolled and galvanised steel products, investment holding and others. In this quarter, CSCSTEL recorded a higher revenue but lower profit before tax than that of its corresponding quarter. The significant deterioration in profit is due to substantial increase in production cost due to higher raw materials cost exacerbated by rapidly weakening Ringgit vs US Dollar during the quarter under review and the absence of the write back of doubtful debt amounted to RM16.9 million which happened in the corresponding quarter. Despite the weaker quarter, CSCSTEL still performed better in FY16 than in FY15. On top of that, The Group has declared dividend payout of 14 sen in FY16, which is the highest since FY09.

3) DUFU

The Group, through its subsidiaries, is engaged in manufacturing of industrial products, such as die components and precision machining of vice, computer peripherals and parts, for hard disk drive, precision steel moulds and parts and components for electronic equipment, and optics, magnetism drivers and parts. In this quarter, DUFU profit before tax has increased by three-fold compare to its corresponding quarter. This is due to:

  • Depreciation of Ringgit Malaysia against USD.

  • Gain on dissolution of subsidiary amounting to RM3.71 million.

  • Reversal of receivable and inventories amounting to RM1.16 million and RM1.22 million respectively.

  • Continued improvement of production efficiency and effectiveness.

  • Improve in interest income in the quarter under review.

4) ELSOFT

ELSOFT, a company, which involves in design and production of automated testing equipment (ATE), has shown an organic growth of 28% in revenue and 19% growth in net profit for the full FY16. Besides that, we like the way the company has been maintaining its net cash and debtless position over the years till the latest quarter. Due to healthy cash flow, the company rewards its shareholders with a total of 10 sen dividend in FY16 or 5.9% dividend yield at current price. However, due to the unfamiliarity of the business, perhaps we could dive deeper into the business to explore further in future.

5) FACBIND

FACBIND made it to our list as a surprising guest. When we first flipped through the Annual Reports of FACBIND, we are unimpressed by the inconsistency in business performance and its lack of transparency. However, on a second look, we notice there are some features in FACBIND that would make it appealing to certain value investor, which belong to certain school of thought that is losing its popularity nowadays. We decided to cover FACBIND to test the feasibility of such valuation method in BURSA.

6) HAIO

Hai-O Enterprise Berhad is engaged in the wholesaling and retailing of herbal medicines and healthcare products and investment holding. In this quarter, The Group pre-tax profit was higher mainly attributable to higher revenue achieved by the Multi-level marketing (“MLM”) division. Although the current price is not attractive, The Group has a very good fundamental based on the financial numbers. Also, The Group has been improving steadily since the start of FY16.

7) MFCB

MFCB once again made it to our shortlist. The Group’s revenue in 4Q 2016 was RM283.3 million representing an increase of 78% from RM159.2 million in 4Q 2015. The higher revenue was mainly due to the recognition of construction revenue of RM119.9 million for the Don Sahong Hydropower Project. Physical completion of the Don Sahong Hydropower Project is on schedule and has reached 16.5% as at the end of December 2016 (It was at 11.5% completion at the end of September). 

8) TGUAN

TGUAN is one of the popular companies that is widely covered by many analysts and bloggers. However, the F&B manufacturing company has faced a sell off from the market, due to below expectation performance in FY16 Q4, and also recent share disposal of the major shareholders. Nevertheless, the company has been showing strong balance sheet and growth prospect for this year. We would be interested to go into the details of the business model as well as its growth prospects.

9) FAVCO

FAVCO, a crane manufacturer and supplier, which has not been in the market spotlight for some time, due to its involvement in challenging Oil and Gas environment. Despite of being stuck in the low cycle of industry, the company has not shown any weakness in its cash flow and continue to keep its net cash position. In addition, the company has been treating its shareholders generously with good dividend payout, and has also proposed a 15 sen dividend in the latest FY16 Q4 financial report, which gives 5.4% dividend yield at current price.

10) HOCK LIAN SENG

Thanks to the recent Changi Airport project win, HOCK LIAN SENG (HLS)’s civil engineering orderbook should now be at record high of SGD 963 mil, representing earnings visibility for the next 3 to 5 years. In addition to the exciting prospects, we found that net cash of HLS stood at SGD 950 mil, representing 60% of market cap at time of writing. Covering HLS is not only the first time for us to analyze SGX stocks in this blog, but also the first time we cover major contract based contractor and developer, which usually which inconsistent cash flow due to the business nature.

To review:

1) RGB

We first covered RGB on 18 December 2016. We think highly of the management, stating that could be one of the most attracting part in investing in RGB. However, recent Q4FY17 (Revenue drop -31% yoy and Net Profit drop 39% yoy) came in as a negative surprise to the investors, mainly because the managing director being publicly optimistic to RGB full year performance beforehand. Does this change our view as to the integrity of the management? Should existing shareholders of RGB continues to hold on the shares? 

2) IQGROUP

We first covered IQGROUP on 8 January 2017. It announced impressive Q3FY17 result with net profit went up +138% yoy. Not only so, this is also the most profitable quarter for IQGROUP (Net Profit RM 8.35 mil) ever since listed. However, the revenue of current quarter is not especially outstanding compared to previous few quarters. Was it attributed to higher profit margin? or one off income? 

3) SOLUTN

SOLUTN, an engineering equipment and services company, which was covered previously, has continue to show growth in both revenue (+12%) and net profit (+45%) in the recent released FY16 Q4 financial report. The company concluded the FY16 with an overall revenue growth of 22% and 42% surge in its net profit. Can the company continue to keep its strong performance in FY17, is the market valuation of the company providing sufficient margin of safety for long term investors to invest at current market price? We shall find out further.

The above mentioned stocks are the ones we deem interesting to conduct further study based on recent 4Q16 report card. We will pick some of our case studies and present them in coming weeks. Stay tuned!

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