Daiman- testing its long-term downtrend line

Background

Daiman Development Bhd ('Daiman') is a property developer with 3 on-going projects in Kota Tinggi, Kulai & Johor Bahru Tengah, Johor. Its investment properties are Wisma Daiman & Daiman Apartment.

Recent Financial Results

Daiman's financial performance is very unexciting for the past 8 quarters. For QE30/6/2009, its net profit increased significantly by six-fold q-o-q or 59% y-o-y to RM15 million while turnover was 56% higher than the immediately preceding quarter but 14% lower than the previous corresponding quarter. The improved bottom-line was attributable to higher sales & realized forex gain.



Valuation

Daiman (closed at RM1.62 today) is now trading at trailing PE of 15 times (based on last 4 quarters' EPS of 11 sen). While this is high for unexciting property counter, the stock is trading at a Price to Book of 0.4 times only. Daiman is a cash-rich company with cash or near-cash reserves of RM278 million as at 30/6/2009. This gives the stock a cash backing of RM1.18 per share. If this is deducted from the share price, Daiman is now trading at a PE of 4 times only. However, I must caution that many investors have sunk money into this stock on the same rationale but they have yet to enjoy their just reward.

Technical Outlook

The main reason why we should be looking at this stock is because there are some signs that this stock is poised for a possible upside breakout of its very, very long-term downtrend line. The resistance for that downtrend line is at RM1.65 (see Chart 1 below).


Chart 1: Daiman's daily chart from 1992 to Oct 22, 2009(source: Tradesignum)

The stock has already broken above its downward channel at RM1.50 in July this year (see Chart 2). Since then, the stock has entered into a consolidation phase where sellers came out & disposed off their holding quite aggressive. This selling seems to have been exhausted. Today, we might have witnessed the continuation of the prior short-term uptrend. For this stock to go higher, it must break above the long-term downtrend line at RM1.65. This level was tested today.


Chart 2: Daiman's weekly chart as at Oct 23, 2009_10.00am (Source: Quickcharts)


Chart 3: Daiman's 60-min chart as at Oct 23, 2009_11.15am (Source: Quickcharts)

Conclusion

Daiman maybe on the verge of an upside breakout of its long-term downtrend line. It is a fairly attractive property stock, with relatively thin trading volume. It is worth tracking closely for a potential sizeable return.