MHC – MYR1.90 (Stock Code: 5026) (Bloomberg Code: MHC MK Equity)
MHC made a major weekly Wave 4 low at RM1.00 (in Sep 2011) with grossly oversold and bullish signals. Due to its firmly positive weekly chart signals, the indicators are pointing firmly upwards to a move towards the
resistance and upside target areas of MYR2.11, MYR2.47 and MYR2.58 in the short term.
We advocate a SHORT-TERM BUY (TECHNICAL) on MHC on dips, with stop-loss at MYR1.66.
MHC’s principal operations include the cultivation of palm oil and the management of Teluk Anson hotel. Based on their 4Q2011 results, the group’s profit before tax (PBT) increased by 28.38% from MYR 24.63m to MYR31.62m. In addition to that, the group’s EPS has advanced by 28.4% from 17.54sen per share to 22.52sen per share. The increase in prices of Fresh Fruit Bunches (FFB) and yield by 23% and 2% respectively mainly contributed to the advancement in its PBT. Furthermore, there was recognition of negative goodwill of MYR1.27m which arose from the acquisition of additional shares in an associate during the current quarter, as well as increased contributions from the associated companies.
The profitability for the last quarter is lower than the immediate preceding quarter mainly due to decrease in FFB production and price by 10% and 4% respectively. Moving forward, MHC’s board is confident that the
group’s prospects would remain satisfactory in view of favourable palm oil prices and strong demand of palm oil, barring any unforeseen circumstances. Further to the upward trend of CPO prices, MHC also declared a bonus issue on the 21 March 2012. However, it has yet to confirm the ex-date of the bonus issue.
Maybank IB does not have fundamental coverage on MHC. A check on Bloomberg reveals that no other research house has initiated coverage on the counter at this point in time. The stock is trading at PER of 8.4x
and has an indicated dividend yield of 1.06%.
Recommendation
MHC made a major weekly Wave 4 low at RM1.00 (in Sep 2011) with grossly oversold and bullish signals. Due to its firmly positive weekly chart signals, the indicators are pointing firmly upwards to a move towards the resistance and upside target areas of MYR2.11, MYR2.47 and MYR2.58 in the short term.
We advocate a SHORT-TERM BUY (TECHNICAL) on MHC on dips, with stop-loss at MYR1.66.
HC Plantations Berhad (MHC) is an investment holding company whose subsidiary cultivates oil palm and rubber, sells fresh fruit bunches, and operates a mill. It also operates a hotel and develops properties.
by Maybank Investment Bank
