Background

Perusahaan Sadur Timah Malaysia Bhd ('PERSTIMA') is involved in the production of high quality Tinplate for both domestic and export market. The Malaysian operation has a production capacity of 260,000 MT per annum. In 2002, it established PERSTIMA (VIETNAM) Co. Ltd. which also produces prime grade tinplate, with a rated capacity of 90,000 MT/annum.

Recent Financial Results

Perstima has just announced its results for QE31/12/2009, where its net profit increased marginally q-o-q but jumped by 16-fold y-o-y to RM20.7 million. Turnover was mixed, down by 25% y-o-y but up a meager 3.2% q-o-q.


Table: Perstima's last 8 quarterly results

Perstima's Performance & Tin Prices

I have appended below the last 22 quarterly results of Perstima (the lower chart, with chronological order running from right to left) & the price movement of tin during the same period (the upper chart, with chronological order running from left to right). We can see a close correlation between these two charts. So, if tin prices continued to trend higher, Perstima's bottom-line would continue to rise.


Chart 1: Tin Prices & Perstima's 22 quarterly results (Source of Tin Prices: LME)

Financial Position

Perstima is in excellent financial position. Its liquidity position is very good as reflected by a current ratio of 5 times while leverage position is negligible as reflected by its borrowings to shareholders' funds of only 0.05 times.

Valuation

Perstima (trading at RM3.80 as at 11.15am) has a PER of 6 times (based on last 4 quarters' EPS of 65 sen). At this PER multiple, Perstima is deemed very attractive.

Technical Outlook

Perstima is in an medium-term uptrend, guided by either the 50-day SMA line or 100-day SMA line (see Chart 2). However, Perstima seems to be range-bound in the past 5 years, with support at RM2.00 & resistance at RM4.00 (see Chart 3). As such, Perstima's short-term upside may be limited, unless it can surpass the RM4.00 resistance level.


Chart 2: Perstima's daily chart as at Jan 29, 2010_9.45am (Source: Quickcharts)


Chart 3: Perstima's weekly chart as at Jan 29, 2010_11.30am (Source: Quickcharts)

Conclusion

Based on good financial performance & attractive valuation, Perstima can be a good stock for long-term investment. Its upside potential is somewhat limited if viewed from the technical angle. In the current uncertain market condition, you can wait for better prices to appear (say, a pullback to the 50 or 100-day SMA line).