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Friday, January 23, 2015

Tiong Nam up 5% on cheaper oil, property earnings

KUALA LUMPUR (Jan 23): Tiong Nam Logistics Bhd gained as much as seven sen or 5.3%, possibly on cheaper crude oil, which translates into lower fuel cost for the firm.

Tiong Nam (fundamental: 1.3; valuation: 1.8) climbed to its intraday high of RM1.39 before paring gains. At 12.30pm, the stock settled at RM1.37 with some five million shares changing hands.

Analysts have noted Tiong Nam's share gains this week. "Tiong Nam’s share price have been on the uptrend since the beginning of the week, with the stock rising 13.7% since Monday while volume increased over ten-folds

"Just yesterday, the stock rose 3.13% to close at RM1.32, possibly encouraged by the slump in oil prices, which translates into lower fuel costs for logistics players," The Edge Research wrote in a report.

Edge Research's report is available in The Edge Financial Daily and today.
Tiong Nam is featured as a stock with momentum based on algorithm.

Tiong Nam's property unit is also being closely watched. Edge Research said Tiong Nam enjoyed steady property development earnings.

"Tiong Nam has enjoyed steadily rising turnover from FY March 2010 to FY2013, with sterling performance in FY2014 when its revenue leapt 56.8% to RM 533 million, driven largely by the property development segment which grew six times from RM152 million to RM178 million.

"Property has since surpassed its core logistics business to be the largest operating
segment," Edge Research said.

Edge Research, however, warned that the recent high contribution from property might create earnings sustainability issues in Tiong Nam during a property down-cycle.

Tiong Nam's valuation is also worth noting. Edge Research said Tiong Nam was traded at a trailing 12-month price-earnings ratio (PER) of seven times.

Bloomberg data showed the sector average PER is about 121 times, derived from valuations of logistics and real estate firms.

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