As a short review, in FY2017, the group revenue grew merely 4.9%, however both EBITDA and net income dropped -9.9% and -10.0% respectively. The reason for eroded profit margin is due to the higher input costs such as raw materials and fuel costs. As such the stock price dropped around -6.8% from the end of 2016 to the end of 2017.

It should not be surprised of the depressed profit margin in 2017. As reported in many financial daily, the Malaysian GDP growth rate did not reflect on the corporate earnings growth last year. So no point to sell this stock due to this negative result. Contrarily, at least for me, this is a good time to accumulate this stock.

First, I consider the palm oil price is actually trending down since its peaked at January 2017. See exhibit 1.

Second, I check the group quarter result again and I noticed that both COS and SGA are also declining but gradually.

My expectation is the profit margin will be gradually improve in FY2018. Further, as mentioned in the 4Q financial report, the demand of biscuit is growing in both domestic and overseas market, I believe the company will continue its growth track in long run.

I like this company because of its well-known brands and clean balance sheet. Further, I expect the company will maintain its 6 cents dividend payout in FY2018, which is equal to 5.5% dividend yield based on market closed price RM 1.10 on Feb.23, 2018. No valuation from me this time. However TA securities issued their target price of RM 1.25 for this company on Feb.9, 2018.

https://streetanalystblog.wordpress.com/2018/02/25/hupseng-needs-to-be-patient/