Engtex reported higher topline & bottomline for 2Q2008

Engtex reported improved topline & bottomline for 2Q2008 ended 30/6/2008. Its net profit increased by 6.0% q-o-q or 258% y-o-y to RM12.2 million, while turnover increased by 19% q-o-q or 64% y-o-y to RM228 million. Engtex attributed its better performance to "the strong market demand of its metal-related trading products and manufactured steel products in tandem with the uptrend in international and domestic metal prices".



Engtex's EPS averages about 5 sen for the past 3 quarters. If its could maintain that performance for FY2008, its EPS would be about 20 sen. Based on its closing price as at 22/8/2008 of RM1.18, Engtex is trading at a PE of 5.9 times. This is quite attractive.

From Engtex's daily chart below, we can see that the share price has been going up in a very steep short-term uptrend, with support at RM1.10-12. As noted previously, the stock's long-term downtrend resistance is about RM1.10-15. A convincing break to the upside of that downtrend could send the stock to the next resistance at RM1.35 and thereafter to RM1.80. Nevertheless, we have to watch closely for any breakdown of the short-term uptrend line, which could send the stock into a short-term correction. The previously correction in June was very sharp, with the share price dropping from a high of RM1.04 on June 2nd to a low of RM0.68 on July 4th.


Chart: Engtex's daily chart as at August 22nd (source: Quickcharts)


Based on the improved financial performance, Engtex could be a good investment for the medium to long-term. However, one should be careful of any potential short-term correction due to its recent sharp price run-up.