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Moolah
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Posting #1: Wed Aug 16th, 2006 08:03 |
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Sales Net Profit Margin SE Rose
2000 116.498 15.516 13.32% 115.700 13.41%
2001 103.845 6.714 6.47% 122.420 5.48%
2002 102.387 11.779 11.50% 128.210 9.19%
2003 132.301 19.868 15.02% 142.288 13.96%
2004 217.758 43.966 20.19% 170.708 25.76%
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The very first thing I would like to do is look at is the track record.
The above table shows TongHerr's track record since 2000.
Would one call TongHerr as a growth stock?
Well, the issue of this growth is rather complex. It depends very much on the starting point of reference.
For example, the starting period from 2000 and 2001 will both yield different annual compounding profit (eps) growth rate... yes?
If one used 2000 as the starting point, one will have a compounded annual profit growth of 29.7%!
If one used 2001 as the starting point, one will have a compounded annual profit rate of a whopping 87%!
So what i really want to say is growth is such a fuzzy issue. For me, i find predicting and projecting growth rates is extremely difficult, and more so if the company does not have a consistant set of earnings or when a company's earnings can be affected greatly by cyclical factors (such as commodity prices).
Take a look again at the table above.
In 2000. The company's net profit was 15.516 million.
In 2001. This company's net profit was 6.714 million.
In 2002. This company's net profit was 11.779 million.
If you look at those facts above, in 2003, how would you define TongHer?
Well.. if you had invested in it since 2000, you would still be left cursing in 2003. Cause despite its fantastic showing in 2002, in which net profit improved by a whopping 75.4%, the total net profit achieved in 2002, was still BELOW what Tong Herr did in 2000.
Ahhh... unless if you had invested in TongHer in 2001... you would proudly declare that Tongherr is one heck of a growth company.... but if you throw in those 2000 figures, you would probably described it best as achieving a remarkable turnaround. right?
now in 2003...
In 2003. The company's net profit was 19.868 million.
same thing again... if you had invested in 2000, it took the company 3 years to improve its annual net profit from 15.5 million to 19.868million. 3 years to show an improvement of 28%. Which i guess, one could define as decent but then one might not considered as truly fantastic cos another company expanding their net profit at an annual compounded rate of 9% would have achieved a much better result. Yup, cos Tongherr annual compounded growth rate since 2000 is only at 8.4%. Decent but not truly fantastic.
on the other hand... if you had invested in it in 2001... you would have gone goo-goo-ga over this one... cos the company you had invested in 2001 had only an annual net profit of 6.7 million. 3 years later, the company did 19.868 million. This is an annual compounded growth rate of 43.6%. Awesome.
Soo... the difference of one year, showed annual compounded growth rate of vast difference. One is at 8.4% and another at 43.6%.
See the difference?
So going forward... would one dare to ASS-u-ME that Tongher's annual compounded rate would continue at the whopping 43.6%?
See the complexity of the issue of GROWTH?
Perhaps it would have been better to understand what is happening in TongHerr.
Which means spending some extra time digging for information.
Well, if looks into Bursa Malaysia website, one would have found this announcement from TongHerr.
3/3/2003 EXPIRY OF CERTAIN ANTI-DUMPING AND COUNTERVAILING MEASURES
this one explains the lifting of anti-dumping measures imposed on manufacturers like Tongher.
End result?
This marked the start of ze good times for Tongher (ps remember the flip side hor... without this... tongher was really a pretty average company only, in fact there was signs it was struggling a bit)
Then came early 2004.
Ahhh... commodity prices started to soar. Gold soared. Silver soared. Metals soared. This was it... the start. The catalyst for Tongher's good fortune.
with the rise in metal pricing... tongher was able to impose a better pricing for their steel fasteners... [ u see this is why i agree with u that Tongher's business is strong enuf for it to pass the cost down...]
Good fortunes... yet again.
Although Tongher has been hit by higher material cost, judging from its most recent 2 quarters, there has been evidence that TongHer has been able to pass down its material cost to its end-users. Meaning Tongher has been able to raise price (with improved margins of course). [ with Tongher passing the cost down... and Tongher having inventory of raw meterials at 'old costing'... tongher managed operating margins above 30%]
time to check with what Tongher's management notes in their latest quarterly earnings....
well this is what they said:
1. Material changes in the Quarterly Results compared to the results of the preceding quarter The Group recorded a revenue of RM52.2 million and profit before income tax of RM15.6 million on this reporting quarter against its results of RM50.2 million and RM15.3 million respectively as recorded in the preceding quarter.
The increase in revenue and profit before taxation during this quarter is mainly contributed by improvement in product pricing for stainless steel fasteners as compared to the preceding quarter.
Improvement in better product pricing for their stainless steel fasteners.
Ahh.... this is what is all about. Better pricing, upliftment of anti-dumping duties. These two factors contributed significantly to Tongher's recent and current good fortunes.
with the rise in metal pricing... tongher was able to impose a better pricing for their steel fasteners...
ahhh... but then... there is a flip side to this steel price increase.
Steel is but a cost of their product itself. So once their own inventory of raw material is depleted, Tongher's raw material cost will but increase.
to be continued....
(ps this compilation of postings is based on discussion done in July 2005)
Attachment: tongher.jpg (Downloaded 156 times) Last edited on Wed Aug 16th, 2006 08:19 by Moolah
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Moolah
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Posting #2: Wed Aug 16th, 2006 08:21 |
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Continue..
Look at the quarterly table posted in the earlier message.
note how 2004 q1 and 2004 q2, tongher managed to get a fantastic operating margin of over 30% on its products? (this was the start of bull in commodity prices mah - and Tongher had the 'cheap' inventory of raw materials)
now loook at 2004 q3 onwards, look at the margins. Although still good, it is not as geng (terror) as in 2004 q1 and 2004 q2... [ see the next 3 quarters? 26%, 20%, 25% operating margins only. Doesn't this suggest to u dat Tongher's raw materials dah habis? And once habis, Tongher has to replenish their raw material inventory (which means higher cost)]
err... wouldn't this explain why tongher's profits and performance has 'stagnant' since 2004 q2?
Anyway, this is a decent choice cos at current prices, this is a decent company... however the problem is that perhaps 2004 was simply too good!
And becuase it was too good, right now, at this moment in time, I would say it's really pretty difficult to estimate wat lies ahead for tongherr... ie.. would their growth grow? or would it be stagnant?
btw... this is the quarterly net profit chart i made from excel...
from what isee... ie looking at the last 5 dots on the rite... it wud appear to me that tongher's net profits growth has stagnated...
rite ar?
to be continued....
Attachment: therr.jpg (Downloaded 115 times)
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Moolah
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Posting #3: Wed Aug 16th, 2006 08:27 |
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On Aug 2005, TongHerr announced its 2005 Q2 earnings.
On a q-q basis, net profit fell to 7.777 million from a pervious quarter net profit of 10.161 million.
See table below.
Attachment: th2.jpg (Downloaded 122 times)
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Moolah
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Posting #4: Wed Aug 16th, 2006 08:34 |
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30th Aug 2005.
this is where i think things cud get very tricky and risky....
for example.... why is it risky to buy stocks whose earnings is on a downtrend?
The main obvious reason is... once the stock earnings begins on a downtrend, the obvious risk is that the stock fundamentals could be on a decline. The classical sell signal generated by a decay in the stock earnings.
Well, Tong Herr, for the past 5 quarters has been earning around 10-11 million per quarter. This latest earning, Tong Herr only earned 7.7 million. That's a decline of close to around 28%. Now that is the fact. Question is how we want to interpret it, rite?
If we dig deeper, the reason is that Tong her's earnings for that 5 quarters was boosted mainly by the robust prcing in steel coupled by a stronger demand for the stainless steel fasteners. Steel prices has softened, so has demand for Tong Her's products...
So what's next?
Would Tong Her's earnings improve? or
Would Tong Her's earnings decline more? or
Would Tong Her's earnings stabilise around 7.8 million per quarter?
Well....
If Tong her's earnings improve... then..... fantastic lor....
If Tong her's earnings does stabilise... then... there shudn't be much problem..
however.... what if the next quarter, Tong herr earned only 6 million? or less?
Ahh... wudn't that panic investors?
Cause they have seen a stock earning from 11 million to 10 mil to 7.7 mil to 6 mil.... this by definition wud be a clear deterioration in a company's earnings...
and with it... the stock could very much depreciate in it's stock pricing...and that wud very harmful to one's investment, rite?
And what if this happen? then how?
( the analogy of investing on a stock whose earnings is on the uptrend is the same with betting on a horse which is on a winning streak or in form versus betting on a horse which hasn't been winning. )
Tong Herr's closing price yesterday is 3.22.
the below is the 2 year chart of Tong Herr.
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Moolah
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Posting #5: Wed Aug 16th, 2006 08:46 |
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Fast forward 2006.
Tong Herr made a net profit of only 29.675 million for fy 2005.
See how useful them warning signs were?
And see how deadly it was to play to assume the growth?
TongHerr's current 4 quarters net earnings only totalled 24.744 million.
And just for the record, its last reported earnings 2006Q1, Tongherr only reported a net earnings of 5.175 million.
Which is a far cry from those earlier figures achieved in 2004. (again another interesting example of why it is so hard to value a stock whose earnings is so cyclical - and of course the dangers of assigning growth such cyclical stock)
Well, OSK recently had an article and it is BOLDly projecting that the good times are back for TongHerr.
OSK projects a net earnings of 37.3 million for TongHerr's fy2006.
see table below:
How?
Do you reckon that a change of fortune is on its way for TongHerr?
Would you bet on it?
OSK has a target price of 3.88!
And here is a snippet of what it is saying:
Rock with Nickel...
- Record nickel price! Nickel which is one of the major raw materials for the production of stainless steel edged to another record level exceeding US$25,000/MT in July '06 due mainly to tight supply worldwide. BHP Billiton recently admitted to production difficulties at its Queensland Nickel refinery in Yabulu, Australia that may signify a prolonged high price level.
- Recovery in steel price . The agreement reach between the Chinese steelmakers and iron ore millers for a 19% increase in iron ore price in June '06 had pushed steel prices up. Wire rod price which benchmark the stainless steel wire rod price is currently trading at US$460/MT or up 24.3% YTD.
- Good showing ahead? Tracking back on Tong Herr's profit margin since 2000, would be boosted during the nickel and steel up cycle as (i) there is a 3 to 5 month production lag thus a mismatch between the higher selling price vis-Ã -vis lower costs, and (ii) demand is fast gaining momentum during price up trend in anticipation of further price increase and concern of shortage to prolong, hence higher sales (refer to Figure 1 and 2).
- Party has begun... The escalating raw material price is well within our expectation. We are now eagerly waiting for the company's 2Q result to further justify our belief. Apart from that, we expect its Thailand operation to ride on the price uptrend by gradually improve production to optimal level earlier than expected.
- Strong cash position. Tong Herr net cash position stands at RM101.1m as at 31 March 2006 or RM1.19 per share. This should enable the company to easily secure raw materials (by cash payments) that are currently facing shortages as suppliers usually prefer cash settlements than to credit terms. Meanwhile, generous dividend policy should be sustainable going forward.
- Maintain BUY . Tong Herr is one of the top pick under our steel sector universe. Given the sanguine outlook, we maintain our BUY recommendation with 12-month target price of RM3.88 or 29.3% upside. The fair value is derived from a composition of peer PER, peer P/B and Gordon Growth Model on FY06 figures. Coupled with the decent dividend yield of 10.2% for FY06, the stock may potentially deliver a 12-month total return of 39.5%.
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Moolah
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Posting #6: Sat Aug 26th, 2006 06:11 |
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Tong Herr reported its earnings:
Tong Herr Resources Bhd (5010.KU) - Malaysia
2nd quarter ended June 30:
Figures are in Ringgit (MYR).
2006 2005
Revenue MYR63,792,000 MYR49,437,000
Pretax Profit 14,799,000 10,824,000
Net Profit 11,106,000 7,777,000
Earnings Per Share 12.97 Sen 9.25 Sen
Dividend Omitted Omitted
6 months ended June 30:
Revenue 111,409,000 104,116,000
Pretax Profit 22,060,000 24,798,000
Net Profit 16,205,000 17,940,000
Earnings Per Share 19.08 Sen 21.47 Sen
Dividend Omitted Omitted |
Not too bad... pretty decent..
see it said it made 16.205 million for the first 6 months of the year.
However, the balance sheet is simply too good.
Huh? Simply too good?
Yes wor. Simply too good lah.
With no apparent of asset or extraordinary items or increased in borrowings, TongHerr cash flow showed an increase of 44.869 milllion. Where the money come from? (see attached snapshot of cashflow sheet down below)
Am I missing something here? Or did I miss something somewhere?
Don't see anything wrong in the Balance Sheet either.
This is what the company said..
The Group recorded revenue of RM63.8 million and profit before income tax of RM14.8 million in this reporting quarter compared to RM49.4 million and RM10.8 million respectively, as recorded in the preceding quarter.
The higher revenue and profit before income tax for this quarter are due to the higher demand and selling price as compared to the preceding quarter
anyway... another interesting note is that its Thailand plant recorded a revenue of 3.4721 million with a profit before tax of 521k.
Somehow.. i have seen in recent times, so many companies spending a lot of moola, setting up plants in Thailand, Vietnam or China but somehow I do not see much justifications from the earnings contributed by these plant expansions....
Or am I missing something yet again?
:s20:
Tong Herr closed at 3.08
Attachment: tongherr.jpg (Downloaded 129 times) Last edited on Sat Aug 26th, 2006 06:12 by Moolah
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LAL
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Posting #7: Fri Feb 9th, 2007 05:07 |
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FWIW - the MD bought 100K shares (direct holdings) @RM4.20 on 24/1/07.
Could it be a sign of confidence? :s2:
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Moolah
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Posting #8: Fri Feb 9th, 2007 05:10 |
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LAL wrote: FWIW - the MD bought 100K shares (direct holdings) @RM4.20 on 24/1/07.
Could it be a sign of confidence? :s2:
Hi,
could be...
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Moolah
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Posting #9: Mon Feb 26th, 2007 12:28 |
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Tong Herr Resources Bhd (5010.KU) - Malaysia
4th quarter ended Dec. 31:
Figures are in Ringgit (MYR).
2006 2005
Revenue MYR103,703,000 MYR51,025,000
Pretax Profit 26,506,000 3,589,000
Net Profit 18,778,000 6,953,000
Earnings Per Share 16.68 Sen 8.20 Sen
Dividend Omitted Omitted
12 months ended Dec. 31:
Revenue 303,331,000 200,464,000
Pretax Profit 77,087,000 35,357,000
Net Profit 55,696,000 29,676,000
Earnings Per Share 60.13 Sen 35.28 Sen
Dividend 24.00 Sen 22.00 Sen |
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InvestorGila
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Posting #10: Thu Aug 9th, 2007 02:41 |
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Tong Herr Resources Bhd (5010.KU) - Malaysia
2nd quarter ended June 30:
Figures are in Ringgit (MYR).
2007 2006
Revenue MYR139,509,000 MYR63,792,000
Pretax Profit 35,892,000 14,799,000
Net Profit 24,712,000 11,016,000
Earnings Per Share 29.09 Sen 12.97 Sen
Dividend Omitted Omitted
6 months ended June 30:
Revenue 250,874,000 111,409,000
Pretax Profit 62,932,000 22,060,000
Net Profit 43,654,000 16,205,000
Earnings Per Share 51.38 Sen 19.08 Sen
Dividend 0.08 Sen 0.08 Sen |
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