KUALA LUMPUR (Oct 16): Zhulian Corporation Bhd shares rose 9.49% on the back of a growth in net profit for the third quarter of financial year 2015 (3QFY15) due to the strengthening of the US dollar.

At 11am, the stock gained 15 sen to RM1.73. A total of 742,800 shares were traded.

It was the sixth top gainer on Bursa Malaysia this morning.

The stock reached a five-year high on Jan 10 last year at RM4.94. It has since dropped significantly.

Year to date, the stock has dropped 23.66%, underperforming the KLCI which has declined 2.73%.

Zhulian (fundamental: 2.7; valuation: 1.8) recorded a 62.56% increase in net profit to RM16.86 million or 3.67 sen per share in the third quarter ended Aug 31, 2015 (3QFY15) compared to RM10.37 million or 2.25 sen per share in the previous corresponding quarter due to the strengthening of the US dollar.

Revenue declined 11.38% to RM50.67 million in 3QFY15 from RM57.17 million in 3QFY14 due to a drop in demand within the local market.

The company said this was offset by increase in revenue to its markets in Thailand and Myanmar.

For the first nine months of financial year 2015 (9MFY15), Zhulian saw its net profit 13.1% to RM40.51 million compared to RM35.82 million in the previous corresponding period despite a 14.72% decrease in revenue to RM161.15 million from RM188.98 million.

In a note today, Kenanga Research said net profit growth was also slower at 13.1% to RM40.5 million in 9MFY15 due to a higher effective tax rate of 23.3% as compared to a 20.3% tax rate in 9MFY14.

The research firm said it is maintaining its cautious stance on the company’s prospects as consumer sentiment has succumbed to a six-year low in the second quarter of 2015 (2Q15).

“With the Goods and Services Tax (GST) implemented since 2Q15, we do not expect consumer sentiment to recover quickly, particularly in the retail/MLM sector,” the note read.

“Meanwhile, the Thailand market is still weak judging from the weak contribution from associates,” it added.

However, the research firm noted that moving forward, the group is aiming to attract more distributors, particularly young entrepreneurs who are looking for low entry-cost ventures by adopting ‘small ticket items’ strategy.

The group is also aiming to attract new distributors and retaining existing distributors by enhancing the effectiveness of R&D efforts in developing new products, introducing more promotional campaigns and improving the quality of its customer service.

Kenanga Research has maintained its “Underperform” call on Zhulian with a target price (TP) of RM1.41.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)