Hot Stock Zhulian fell 5.63% on net profit plunge

by **Cals** Fri 18 Jul 2014, 01:05

Hot Stock Zhulian fell 5.63% on net profit plunge

Business & Markets 2014

Written by Charlotte Chong of theedgemalaysia.com

Thursday, 17 July 2014 13:36

KUALA LUMPUR (July 17): Zhulian Corp Bhd’s share price fell 5.63% to RM2.68 in tandem with a plunge in net profit for its second quarter ended May 31, amidst the political crisis in Thailand.

Among the top losers across the local bourse, Zhulian Corp fell 16 sen to RM2.68 at 12:12pm after plunging to as low as RM2.61 earlier with some 2.18 million shares changing hands.

Its net profit for the second financial quarter ended May 31 had plunged 78.19% to RM8.27 million from RM37.93 million a year ago.

Revenue had also dropped 38.2% to RM65.65 million from RM106.23 million. Likewise, its earnings per share deteriorated to 1.8 sen from 8.25 sen a year earlier.

For the six months ended May 31 this year, the group registered a lower net profit of RM24.45 million, down 62.4% from last year’s RM67.67 million. Its revenue came in 38.68% lower at RM131.8 million from RM214.95 million.

However, the company has declared a second interim single-tier dividend of 3 sen yesterday.

In a result note to Bursa Malaysia yesterday, Zhulian Corp explained that the decrease in revenue was mainly due to a fall in both local and overseas market demands.

The multi-level marketing firm added that the drop in profit after tax was in line with lower revenue and share of profit of accounted investee.

Kenanga Research analyst Khoh Wei Keen said in a note today that it was maintaining its “market perform” rating with an unchanged target price of RM3.08 based on an unchanged targeted FY15 PER of 14.6 times over its EPS of 21.1 sen

“We opined that Zhulian’s share price has bottomed as a lot of negatives have been priced in. FY14-15E net dividend yield of 3.5%-4.4% should limit further downside risks of the stock,” Khoh said.

“While Thailand’s general elections are around the corner, Zhulian’s re-rating will come when the political climate in Thailand settles down post election and when there is clarity on Thailand’s rural area policies, which includes rice subsidies.”

If all goes well in the next few months, Khoh said that it might look to review its recommendation.