Tien Wah Press Holdings Bhd
(Aug 15, RM1.27)
Maintain sell with an unchanged target price of 94 sen: Tien Wah Press Holdings Bhd’s (TWPH) second quarter of financial year 2019 (2QFY19) revenue increased by 0.9% year-on-year (y-o-y) and 5.8% quarter-on-quarter (q-o-q). The growth was mainly due to higher sales under one of its major customers’ contract. The relatively bigger increase q-o-q was due to its lower revenue in 1QFY19 owing to the long Vietnam New Year holiday closure.

TWPH’s net profit fell 68.5% y-o-y, but improved substantially q-o-q as it swung back to the black from a loss in 1QFY19. The operational improvement was attributed to higher revenue and continued improvement in efficiencies as the group completed its new production footprint. The current quarter results have been impacted by higher operating costs as the group incurs additional costs to complete its new production footprint in 2019 and cost to intensify its Dubai operation to compete in the Middle East market. The group’s margin is set to improve as relocation and production footprint costs subside, but we maintain our FY20 estimates until clearer earnings visibility in the coming quarters.

TWPH management guided that with the completion of relocation costs from Indonesia, Vietnam and Dubai and closure costs from Australia, the group is expected to recover in 2020. However, given poor market conditions and challenging outlook, we maintain our “sell” recommendation at price earnings of 13 times of FY19 forecast earnings per share. — Mercury Securities Sdn Bhd, Aug 15