Kianjoo- look out for the Bonus Issue

Result Update

For QE31/3/2013, Kianjoo's net profit
dropped 32% q-o-q but increased by 12% y-o-y to RM30 million while
revenue has similarly dropped by 3% q-o-q but rose by 13% y-o-y to
RM301 million. When compared to the immediate preceding quarter
(QE31/12/2012), revenue from Cans & Cartons division dropped due to
higher orders from customers in QE31/12/2012 to meet festive season
demand. Pre-tax profit for Cans division dropped 19% q-o-q to RM34.9
million (due mainly to derivative losses of RM1.8 million cf. gain of
RM4.2 million previously). Cartons division's pre-tax profit dropped
21% q-o-q to RM3.8 million due to lower sales & higher operating
overhead & cost. Contract Packaging Services division reported
lower revenue of RM12.8 million (from RM14.7 million ) and a pre-tax
loss of RM2.1 million cf. to a profit of RM0.3 million previously

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Table: Kianjoo's last 8 quarterly results

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Chart 1: Kianjoo's last 26 quarterly results

Valuation

Kianjoo
(closed at RM2.66 yesterday) is now trading at a PE of 10 times (based
on last 4 quarters' EPS of 27.3 sen). At this multiple, Kianjoo is
deemed fairly attractive.

Outstanding Corporate Exercise

Kianjoo
has proposed a Bonus Issue of 1-for-2 and a Rights Issue of warrant on
the basis of 1-for-4 shares held after the Bonus Issue at a price of
only RM0.01 each. This corporate exercise attracted opposition from
Canone, the present majority shareholder earlier went it was not a
registered owner of the shares which it successfully bid in an auction.
With the ownership of Kianjoo registered in its name, Canone- like all
Minority shareholders- should welcome the proposed Bonus Issue.
Technical outlook

Kianjoo
is in an uptrend line with support at RM2.20. Presently it is resting
on the horizontal line at RM2.65. From here, Kianjoo may slowly rise
again, especially when the date of entitlement of the Bonus Issue has
been finalized.

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Chart 2: KIanjoo's weekly chart as at Mar 22, 2013_11.00am (Source: Quickcharts)

Conclusion

Based
on improved financial performance, attractive valuation & positive
technical outlook, Kianjoo is a good stock to hold 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, Kianjoo.

Author: Alex Lu