We are disposing our 60k HOVID shares from the GROWTH portfolio at RM0.285 after the stock rallied 16.3% since the release of its 4Q13 result on 30 August and surpassed our target price of RM0.26. We believe the recent rally was mainly due to its strong FY13 result, where its net profit surged 29.6% YoY to RM20.3m meeting our expectation. On top of that, the continued stake increase by its second largest shareholder – Lembaga Tabung Haji, also helped. The strong FY13 result was largely due to (i) nonrecurring gains of RM3.8m, (ii) absence of an associate company’s loss, and (iii) higher demand for its pharmaceutical products. Meanwhile, the group also declared an interim 1.3 sen gross dividend where the dates of book closure and payment will be announced later. The disposal of our HOVID shares generates a total capital gain of RM4.2k (or 28.6%), comprising RM2.4k gain from the disposal of HOVID shares at RM0.285 and RM1.8k gain from the disposal of 30k free HOVID-WA at RM0.06/share at 17-May 2013. While the group’s outlook appears intact, its PER valuation of 9.8x (based on FY14 EPS of 2.9 sen) appears rich in this juncture thus prompting us to take profit.

 

Source: Kenanga