31 March 2010

Bursa Malaysia: THONG GUAN INDUSTRIES BERHAD (Stock review)

"The Group is principally involved in investment holding, trading of plastic & paper products, tea & coffee, machinery & other consumable products.(from: shareinvestor) TGP is one of Asia Pacific's largest plastic packaging companies with over 30 years of experience and distinguished track record. We are the largest producer of cast pallet stretch film in this region with annual combined production output in excess of 100,000 metric tons." (www.thongguan.com)

Fundamental current financial statement analysis 2010.

1. Cash increased to RM32,921,000.00 at the end of 31 Dec 2009 compared to RM7,631,000.00 at the end of 31 Dec 2008. And got RM 2,950,000.00 at the end of 31 Dec 2009
Comment: High possible to pay more dividend

2. Bank borrowings was redured to RM 22,332,000.00 at the end of 31 Dec 2009 compared to 55,193,000.00 at the end of 31 Dec 2008.
Comment: Good sign for company performance. Deth-to-cash ratio was improved, less possible facing financial crisis.

3. EPS increased to 13.51 sen at the end of 31 Dec 2009 compared to 4.42 sen at the end of 31 Dec 2008.
Comment: The price still drop which causes the PE become even smaller.

4. Although the revenue was reduced to RM 403,060,000.00(2009) compared to RM 564,558,000.00(2008), but gross profit was increased to RM 50,799,000.00(2009) compared to RM 38,310,000.00(2008).
Comment: The decrease in revenue was mainly due to the significantly
lower average prices of raw materials compared to the corresponding period in 2008 which translated to lower selling prices. The increase in profit before taxation was mainly due to the written down in the value of the Group’s inventories to its net realizable value in the preceding year.(From: announcements.bursamalaysia)

"Group revenue for the twelve months ended 31 December 2008 was RM564.584 million compared with RM518.215 million for the twelve months ended 31 December 2007, an increase of 8.95%. Group profit before taxation for the year ended 31 December 2008 was RM3.790 million, a decrease of 76.33% over the RM16.014 million registered in the corresponding period in 2007. Revenue increased was mainly due to the increase in the average price of plastic raw material in 2008 compared to the average price in 2007 which translated to higher selling price. The decrease in profit was mainly due to the write down to net realisable value in inventories amounting to RM12.227 million."

Reference: http://announcements.bursamalaysia.com/EDMS/edmswebh.nsf/all/482576120041BDAA482576D50038B637/$File/NOTES.pdf

So, the question is: what is the raw material for plastic and how is its price trend in the future?
According to WikiAnswer, "the raw material for plastic is Crude oil. I am 110% sure, and its also made from Carbon, Hydrogen, and Oxygen!" In order words, when the price of Crude oil increase, the profit of Thong Guan might be affected!!!

Next answer about the crude oil price trend in the future, let's see the history

In conclusion, no one can predict the price of oil 100% correctly. But it is worth to spend time to investigate all fundamental information before make any investment.

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Written by: Xaivier Chia

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