GCorp announced its results for 3Q2010 ended 31/10/2009. It reported a net profit of RM24.1 million- an increase of 62.2% when compared to the same quarter last year but a slight drop of 1.5% when compared to the immediate preceding quarter. Turnover was up 24.7% q-o-q or 224% y-o-y to RM521 million. GCorp continued to benefit from the development projects and overseas operations, via Low Keng Huat (Singapore) Limited.
Table: GCorp's 8 quarterly results
Chart 1: GCorp's last 11 quarterly results
Valuation
GCorp (closed at RM1.07 as at Dec 17) is now trading at a PE of 6.4 times (based on its last 4 quarters' EPS of 16.6 sen). I have stated previously that GCorp deserves to be valued at a higher PE multiple (say, 10-12 times) as it is a mid-size diversified group with a good growth track record. On second thought, I think GCorp - being mostly involved in property development & construction- should be valued at a PE of about 7-8 times. Based on a PE of 7.5 times, its fair value would be about RM1.25.
Technical Outlook
GCorp has surpassed its medium-term downtrend line at RM1.00 in June 2009. Nevertheless, the share price failed to charge higher. Its immediate resistance is at RM1.15-20 and thereafter at RM1.35-40.
Chart 2: GCorp's weekly chart as at Dec 21, 2009_3.35pm (Source: Quickcharts)
Conclusion
Based on continued strong financial performance & favorable technical outlook, GCorp could be a good stock for long-term investment. Its present upside may be limited if we pegged its fair value at RM1.25.
5 comments:
Hi Alex,
What are your thoughts on GUH? It'd be great if you can perform a technical analysis on the company. GUH is currently sitting on a net cash of 47sen per share. EPS for 9M'09 is 17sen vs 9sen for 9M'08. Today's STAR article highlighted booming demand for their PCBs.
Thanks,
James
Good day Alex,
Now the hot issue in the banking sector would be the possible take over of EONCAP by HLB. U think negotiations approval granted by bank negara will be fruitful? Based on the past M&A in the banking sector especially CIMB bought over Southern bank, u think how much per share HLB will pay?
Hi James,
I have looked through the accounts of GUH & I must say that it is a very promising company. The results for the last 2 quarters are very strong, especially the manufacturing segment. The contribution from the latter has increased from RM13.7 mil in 2Q2009 to RM24.7 mil in 3Q2009, while sale increased from RM115 mil to RM184 mil.
The technical outlook is however mildly negative. It appears to have made a top & is now in a consolidating phase. It should have good support at RM0.78-85 (from the 20 & 40-week SMA line) but a break below RM0.78 will lead to a short-term downtrend for this stock.
Hi KENNY,
What do I think of the possible merger/takeover of EON Bank by HLBank? This may happen due to the conflict between the main shareholders of EONCap. EONCap reminds me of China during the period of the Warring States.
Quek is only interested in EON Bank. His offer may be an opportunity for some of the main shareholders to outmaneuver their opponent(s) by stripping EONCap of its most valuable asset, EON Bank. If they can get a good price for the bank, that much the better. If EON Bank is sold off, who has the most to lose? Who will be left stranded in EONCap? If a good price is offered, it would be easier to secure the agreement of Khazanah & EPF who hold about 10.% & 11% respectively in EONCap.
How much will EON Bank be priced? Assuming that EON Bank accounts for 90% of EONCap's NTA & a selling price pegged at 2 times NTA, the sale will increase EONCap's NTA per share from RM5.03 presently to RM9.56). How much would EONCap's share price adjust upward? You may price it at a percentage of the NTA per share (say, 80% of RM9.56). This will give you a market value of RM7.65 for EONCap.
The play will be more on EONCap than HLBank. HLBank has already surpassed my estimated fair value of RM7.50 (penned in my post dated July 21, 2009). However, EONCap will not be a easy stock to trade in. If you are risk adverse, you should give it a miss.
Alex, many thanks for your feedback on GUH. Merry Xmas to you and your family. Cheers!
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