Results Update

AJI has just announced a disappointing set of results for QE31/3/2010. Its net profit dropped by 84% q-o-q or 18% y-o-y to RM1.5 million, while turnover increased by 18% y-o-y but slipped 1% q-o-q to RM71.9 million. The drop in net profit was attributable to higher input & energy cost & more competitive pressure, which resulted in higher expenditure incurred for sale promotion.


Table 1: AJI's last 8 quarterly results


Chart 1: AJI's 19 quarterly results

Valuation

The problem for AJI is in the forecasting of its future earning, which ranges from the low of 5.44 sen achieved last quarter to the high of 15.67 sen achieved in QE31/12/2009. If we assumed an average of 9.1 sen, then AJI, which closed at RM4.16 yesterday, would be trading at a PER of 11 times. Based on the sharp drop in commodities prices in the past few weeks, I believe that the average EPS of 9.1 sen is reasonable.

Technical Outlook

AJI should have a good psychological support at RM4.00. The next support is about RM3.40-50, based on horizontal line support at RM3.50 & uptrend line support at RM3.40.


Chart 2: AJI's week chart as at May 24, 2010 (Source: Tradesignum)

Conclusion

Based on poor financial results, AJI's share price would come under selling pressure for the next few weeks. If the share price were to drop to RM3.40-50 level, AJI would be an attractive stock for long-term investment, trading at PER of about 9.3 times.