A Look At Hiap Teck Earnings

Hiap Teck announced its earnings last night.

Let's try some questions and answers. (try something fresh! :p)

Was the earnings report impressive?

Yes and no. LOL! (I know.. some will be cursing and shouting out loud what kind of answer is that!)

By itself, when you do a direct comparison with the previous year, yes, its EXTREMELY impressive. However, if you compare against the previous quarter or the previous years, there are certain issues that one needs to address.

Obviously, the margins are better, no doubt (I, for one, is one that likes to see strong healthy margins!) but the sales revenue indicates that where Hiap Teck is right now, pales in comparison to previous year! (Ah, I am sure that some would be quick to highlight that this is as expected as the global economy has not fully recovered!)

Let me go back a year ago. Take this feature article on Star Business: Hiap Teck plans to venture abroad

That table from Star Business says a lot. For Fy 2008, Hiap Teck made some 155 million. Sales revenue was an impressive 1.66 Billion. Compare those figures to what Hiap Teck announced last night. See the huge difference?

But.. but... butttt..... that's simply not a fair comparison!

True. For during fy 2008, those earnings were artificially boosted by an insane bull run on the steel prices! And surely, it's not fair to expect Hiap Teck to generate the same volume and the same earnings as back then.

That's a fair argument, yes?

How about Hiap Teck stock price back in 2008 compared to now?

Why that question? Well, don't we want to understand where the stock is now compared to previously? Don't we want to understand if the recent stock rally is justifiable or not, based on the earnings.

Now, I have drawn a vertical line on the chart. That line indicates where Hiap Teck was a year ago.

Of course, some would be quick to point out that this comparison is also not fair, because that time frame was simply tough on global stock markets. Stock prices were most likely distorted by panic and fear.

Justifiable argument? Yeah, I think to too.

But for all its worth, at least, one has a fair idea on how Hiap Teck has performed as a stock.

How about the balance sheet? See anything?

Well... have a look.



How?

See the item that stood out sorely?

Cash balances shrunk while short term investment soared!!!!

.... !!!! .............. exactly!

So what are these short term investments?

Good question! The common answer "You ask me, I ask who?" is all that I could think off!

Have a look at their earnings notes snap shot...

Am I not seeing what I am to see? And this is their cash flow satetement.



See their other investments entry??

Arggggghhhhhhhhhhhhhhhhh!!!!!

Honestly, what does Hiap Teck expects as a listed stock?

Do they want their investors and minority shareholders to be left playing the 'teka teki' game?

How?

If you think investment into a listed stock as being a business partner of the company, do you like what you see?

What did the company say about their performance?

From their earning notes.

• Review of performance
  
  During the current quarter under review, the Group achieved a turnover of RM279.635 million, a decrease of 11.42% as compared to RM315.693 million for the corresponding period of the previous year.
  
  The Group’s pre-tax profit in the current quarter under review was RM23.561 million as compared to previous year corresponding quarter of RM15.622 million. However, the Group has made provision for diminution in value of inventory and provision for unrealized foreign exchange loss of RM19.256 million and RM6.6 million respectively in the previous year corresponding quarter.
  
  The performance of the Group for the current quarter under review was affected by weaker market demand and lower selling prices in the current quarter. International and domestic steel prices were in the uptrend for the first three quarters of year 2008, thereafter market demand and steel prices have declined and this has affected the current quarter’s revenue and profit before tax.

Did Hiap Teck perform as per analyst 'expectation?

Ahh... since RHB had a results preview on Hiap Teck, let me post the screen shot of the write-up.

RHB has expected Hiap Teck to make around 72 million this fiscal year. Hiap Teck announced it make some 17 million. On an annualised basis, that should be quite close to what RHB had expected.

And here's RHB write-up today.

Ahh.. in RHB's report today, it states that on q-q, earnings did improved because the previous quarter Hiap Teck's earnings was distorted by "extraordinary gain of RM25.3m in 4QFY07/09".

Well... that's about it... for now.

How?