Background

Atlan Holdings Bhd ('Atlan')is an investment holding company whose subsidiary companies are involved in wide arrays of business. The company has three core business activities:

* Property Investment and Development
* Hospitality and Lifestyle
* Travel Retailing (via, duty free shops)
* Manufacturing

Recent Financial Results

Atlan has just announced its results for QE28/2/2010. Its net profit increased by 111% q-o-q to RM26.1 million on the back of a 12%-increase in turnover to RM204 million. The continued growth in both top-line & bottom-line was attributable to better performance for the Duty Free & Manufacturing Segments. As compared to the previous corresponding quarter (QE28/2/2009), the net profit soared almost 19 folds from a low base of RM140k. The low net profit was attributable to forex losses suffered in that quarter.


Table: Atlan's last 8 quarterly results


Chart 1: Atlan's last 8 quarterly results

Valuation

Atlan (closed at RM3.38 yesterday) is now trading at a PER of 8.7 times (based on FYE28/2/2010 EPS of 39 sen). If Atlan can maintain its healthy growth in the past 2 quarters, we may see higher EPS for FY2011. Based on a PER of 10 times, Atlan's fair value is about RM3.90, giving a potential upside of 15%.

Technical Outlook

The long-term chart for Atlan shows a stock that is trapped within a symmetrical triangle, comprising an uptrend line that stretches back to 1998 & a downtrend line that stretches back to 1996-97. The uptrend line support is at RM2.50, while the 2 possible downtrend lines' resistance is at RM3.70 or RM4.05. Its immediate horizontal resistance at RM3.40 & RM3.20.


Chart 2: Atlan's monthly chart as at April 1, 2010 (Source: Quickcharts)

Others Comment

In an earlier post, I pointed out Atlan's overly aggressive share buyback program undertaken as well as its rather fanciful chart. The earlier comments would be my main reservation about this stock. However, its strong point would be its healthy growth & fairly reasonable valuation, which could lead to a steady rise in its share price.

Conclusion

Based on improving financial performance and reasonable valuation, Atlan could be a good stock for long term investment. Technical outlook is however neutral as the stock is likely to trade between RM2.50 & RM3.70 until a breakout has been achieved.