Eti Tech Corporation Bhd ('Etitech') is involved in the research and development, design, and marketing of battery management systems for rechargeable energy storage solutions.
Recent Financial results
Etitech has just announced its results for QE30/11/2009, where its net profit dropped 36% q-o-q or 19% y-o-y to RM3.4 million, while turnover was mixed- declined by 7.1% q-o-q but increased by 11.7% y-o-y to RM21.8 million. The drop in bottom-line was due to a drop in sales as well as a poorer sales mix.
Table: Etitech's latest 8 quarterly results
Chart 1: Etitech's latest 8 quarterly results
Financial Position
Etitech's financial position is deemed healthy, with high liquidity position as reflected by current ratio of 8 times while low leverage position as refelected by gearing ratio of 0.1 time.
Valuation
Etitech (closed at RM0.415 on Jan 29) is now trading at a PER of 14.6 (based on last 4 quarters 's EPS of 2.84 sen). At this multiple, Etitech is deemed fully valued.
Major Shareholder sold off
Emirates Investment and Development Co. ('EIDC') used to be one of the major shareholders of Etitech, with a stake of 14% or 96 million shares in October 2009. Shortly thereafter, EIDC began to aggressively selldown its stake in Etitech. By January 20, EIDC has fully sold off its stake in Etitech. This information was obtained from two filing made last month, where EIDC filed in on Jan 18 that its stake in Etitech has been reduced to 43.624 million shares (here) & then it filed in on Jan 20 that it has disposed off the remaining 43.624 million shares (here). This was confirmed with the registrar, Securities Services (H) Sdn Bhd. With this source of selling pressure exhausted, the stock is likely to slowly recover.
Technical Outlook
Etitech has been in a downtrend with resistance at RM0.82-83, while support from the channel line at RM0.40. The RM0.40 level happens to be the immediate horizontal support while the immediate horizontal resistance is RM0.46-47.
Chart 2: Etitech's daily chart as at Jan 25, 2010 (Source: Tradesignum)
Conclusion
Based on the completion of the selldown by EIDC, I believe Etitech should stabilize at the RM0.40 level. The stock may not rise very much as it is fully valued at the present price level. The catalyst for a re-rating of the stock may only come after its financial performance has improved significantly. Investors may not get excited with MOUs as there has been a few such announcements over the past few months which failed to lead to anything substantial.
4 comments:
Hi Alex. Affin closed at RM2.62 today. Can i buy more at current level ? Normally will take how long to hit RM2.90 or RM3 ? Thx for ur comment
Good day Alex,
Scomi Engineering is having a rights issue for ICULS at 2 for every 9 held.
Q1) What would happen to the mother's share price when comes to its ex-date?
Q2) What would be the expected trading price for its renouncable rights (OR) when it starts trading on the bourse?
Q3) Normally, would it better to follow through the whole exercise, or to dump the OR during its trading period?
Appreciate your comments to the above. Many thanks.
Hi Wong,
Technical analysis for Affin would give a bullish reading. However, before jumping into this stock, you need to take note of a new Call Warrant issued for Affin, i.e. Affin-CB. The main terms for this CW is :
1) Exercise Price: RM2.40
2) Exercise Ratio: 3:1
3) Expiry Date: Oct 1, 2010
4) Issue Price: RM0.155
It is quite common that the underlying share price would rise around the time of the issuance of a CW. I do not want to speculate on the reason for this phenomenon, except to take note of it. The fact that this happens would certainly make it easier for the issuance of CWs. So, the technical reading could be compromised by this peculiar price action. In the past, the underlying share price would drift back to the prevailing prices prior to the CW issuance, a few days after the listing of the CWs. So, it is advisable that you should discount the upside breakout in Affin or at least do not be too gung-ho on this so-called bullish breakout.
Hi Surewin1woh,
Scomi Engineering ('Scomien') is in the process of completing the issuance of RM68.28 million Irredeemable Convertible Unsecured Loans Stocks ('ICULS') on the basis of two (2) RM1.00 nominal value of ICULS for every nine (9) ordinary shares of RM1.00 each held. This ICULS is likely to called ‘Scomien-LA’.
Scomien-LA will have a tenor of 3 years and will bear interest at a rate 4% pa. Conversion for Scomien-LA is RM1.00, which I presume will be achieved by surrendering 1000 Scomien-LA in exchange for 1000 shares.
I think the share price will adjust lower marginally on the ex-date, but theoretically I don't think there is a need to make adjustment unlike a case of Bonus Issue or Rights Issue of shares. Even the adjustment via market forces would be minimal as the issue is fairly small (2-for-9) and the subscription price & exercise price is quite close to the current price of the share.
Finally, I do not think it makes much different whether a person holding onto this stock would benefit from disposing the stock now & buying back later, rather than holding onto the stock & going through with the exercise. The stock is likely to see some support from the bearish wedge formation at RM1.15-18. A downside breakout of this formation would be bearish for the stock. However, Scomien is likely to maintain at the current price level of RM1.20 as it is only trading at a PER of 5 times.
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