Guan Chong Bhd ("Guan Chong") is involved in the manufacture of cocoa-derived food ingredients such as cocoa liquor, cocoa butter, cocoa cake & cocoa powder.
Recent Financial Performance
Guan Chong's financial performance in the last 4 quarters has deteriorated when compared to the preceding 4 quarters. Its net profit has declined by 10.1% from RM17.5 mil to RM15.7 mil while its turnover has dropped by 7.4% from RM403 mil to RM373 mil.
Valuation
Based on yesterday's closing price of RM0.74 & the last 4 quarters' EPS of 6.6 sen, Guan Chong is now trading at a PE of 11.2 times. This is near the fair value for a small-cap trading in the Malaysian stock market.
Technical Outlook
What's most interesting about Guan Chong is that its share price has been testing its high of RM0.70 since its listing August 2005. It has been doing so for the past 7 weeks (see Chart 1). Each unsuccessful attempt would quickly follow by a sharp drop to RM0.63.
On Monday (January 15), Guan Chong broke above the RM0.70 but there were no follow-through (see Chart 2). The share price retraced back in the last 2 days. Yesterday, it broke above the RM0.70 level as well as surpassing the Monday high of RM0.73. With the latest move, I believe Guan Chong's upside move may finally be taking off.
Chart 1: Guan Chong's weekly chart as at Jan 17
Chart 21: Guan Chong's daily chart as at Jan 17
Conclusion
Despite an unexciting recent financial performance, Guan Chong is a stock worth buying in the light of its bullish technical outlook.
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