Market Capitalisation: RM1,067.3m
Lim Boon Ngee Netresearch-Asia
28 Aug 2008
Recommendation: BUY
1. 2QFY08 Results Highlights
Tradewinds (M) Berhad (TWM) recorded a 250% increase in net profit to RM86.1m in 2QFY08, while turnover was marginally higher. Due to higher tax rate and increase in minority interest, net profit rose at a lower growth rate of 81% to RM42.9m.
The strong earnings growth was driven mainly by its plantation division which benefited from the rising CPO prices. During 2QFY08, average CPO price rose by 45% to RM3,512/mt based on MPOB data. Consequently, operating profit of its plantation division surged by 314% yoy to RM81.0m in 2QFY08.
Operating profit of the manufacturing division fell by 14% yoy in 2QFY08 as it continued to face lower selling price and higher freight costs.
2. 1HFY08 Results Highlights
During 1HFY08, average CPO price was up by 60.5% based on MPOB data. This contributed to the more than 5-fold increase in operating profit of the plantation division to RM161.5m in 1HFY08 as compared with RM28.5m in 1HFY07.
However, manufacturing division recorded an 11% decrease in operating profit to RM31.4m in 1HFY08 due to lower selling price and higher freight cost.
1HFY08 reported net profit, if annualised, is 24% below our earnings forecast. Consequently, we have reduced our earnings forecast by 9% and 12% for FY08 and FY09 to reflect the higher operating costs of its plantation division and lower profit contribution from manufacturing division.
3. Recommendation
Based on our revised EPS forecast of 67 sen for FY09, TWM is currently trading at an undemanding P/E valuation of 5.4x for FY09. The stock, at the current share price of RM3.60, is also below its NTA of RM4.14 per share. We are maintaining our Buy recommendation on the stock.
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