KLCI Stock - SUPERMX / 7106 - 2009 Quarter 4

Market Cap : 1,869,982,048.48 (12 April 2010)
NTA per share : 1.97
P/B : 3.4975
Fixed Asset Turnover(3 year) : (0.8723+0.8575+0.6612)/3=0.797
Liquidity Ratio : 364645/202233=1.8031
Receivables Collection Period : (139364+240006)/2/(814836/365)=84 days

OSK Target Price: 10 (22 Feb 2010)
My Target Price: 8.55+0.11=8.66 (PE 13, EPS 0.6576, DPS 0.11)
My decison: BUY
Reason: Undervalue, high ROE, revenue growth, good cash flow

My notes based on 2009 Quarter 4 report (number in '000):-
- Group Revenue was 7.4% (RM13.6 million) higher on the back of strong global demand, increased output from refurbished lines and higher prices commanded for rubber gloves sold
- The Group recorded a near 30 times increase in Profit after Tax due to incur a one-time exceptional interest expense arising from having to immediately expense off the balance of the serial bond upfront fee following the full redemption of the bond in November 2009
- The Management had resolved to focus on certain key areas including receivables management, inventory management, productivity management and financial management at the beginning of 2009 and the concerted efforts put in have yielded strong results. In addition, the Group has also been focussing on producing high margin products resulting in higher manufacturing profits in the current quarter
- The Group able to gain from the share of its associate companies’ higher profits, it also gained from the favourable foreign exchange translation as the currencies of the countries in which the associate companies operated had all appreciated against the US Dollar
- Compare to preceding quarter, revenue was lower by 17.3% due to the Group’s sales are denominated had depreciated by 3% from an average of RM3.51:USD1 in Q4’08 to RM3.40:USD1 in Q4’09 and lower output and lower sell-through as the Group was impacted by temporary labour
shortage and water supply disruptions in one of its factories
- Nevertheless, the Group was able to post higher Profit after Tax by 9.9%, largely due to an increase in selling prices which enabled the Group to boost its margins further. The industry in general and the Supermax Group in particular are able to command higher selling prices due to a significant global supply shortage
- The Group’s management focus on key operational areas has also yielded substantial results this year with lower inventory and trade receivables cycles as well as higher operating efficiency leading to lower operating costs per unit of output
- Estimate next 4Q eps after 2009 Q4 result announced = 0.1644*4 = 0.6576, estimate PE on current price 7.24 = 10.84(DPS 0.11)
- Estimate next 4Q eps after 2009 Q3 result announced = 0.1514*4 = 0.6056, estimate highest/lowest PE = 10.15/5.3 (DPS 0.0325)
- Estimate next 4Q eps after 2009 Q2 result announced = 0.0972*4 = 0.3888, estimate highest/lowest PE = 8.74/5.14 (DPS 0.0325)
- Estimate next 4Q eps after 2009 Q1 result announced = 0.0743*4 = 0.2972, estimate highest/lowest PE = 6.52/5.01 (DPS 0.0325)
- Estimate next 4Q eps after 2008 Q4 result announced = 0.2499, estimate highest/lowest PE = 6.67/3.07 (DPS 0.0325)