Background

Zhulian Corporation Berhad ('Zhulian') is principally engaged in the manufacture and sale of costume jewelry and consumer products on a direct sales basis. It distributes its products under the brand name of Zhulian within Malaysia and to Thailand and Indonesia.

Recent Financial Results

Zhulian announced its results for 1Q2010 ended 28/2/2010. Net profit increased marginally by 1% q-o-q or 48% y-o-y to RM24.9 million. Its turnover declined marginally by 1% q-o-q but rose 21% y-o-y to RM86 million.


Table: Zhulian's last 8 quarterly results


Chart 1: Zhulian's last 14 quarterly results

Valuation

Zhulian (closed at RM2.45 on April 15) is now trading at a PER of 9.4 times. It has a decent dividend yield of about 5.7%. At these multiples, Zhulian is reasonably priced. Based on PER multiple of 12 times, Zhulian's fair value is estimated to be about RM3.12.

Technical Outlook

Zhulian is in an uptrend, with support at RM1.80. I have also drawn two channel lines- the upper channel line (capping its reaction high) as well as the middle channel line. These channel lines offer support & resistance to the price movement. Since the announcement of the latest results, Zhulian has traded above the previous upper channel line at RM2.35. The present rally could go as high as RM2.65, which is arrived at by adding the distance between the upper channel line & the middle channel line (of RM0.30) to the breakout level (of RM2.35). On weakness, Zhulian may pull back & test the resistance-turned-support at RM2.35.


Chart 2: Zhulian's daily chart as at April 15, 2010 (Source: Quickcharts)

Conclusion

Based on satisfactory results, reasonable valuation (with potential upside) & bullish technical outlook, Zhulian could be a good stock for medium-term investment.