Tuesday, March 09, 2010

Eng & Dufu- the cheaper HDD players

There are a few companies involved in the production HDD components. The biggest company is the recently-listed JCY International Bhd ('JCY'). The next biggest player could be Eng Teknologi Holdings Bhd ('Eng'). Other players include Dufu Technology Bhd ('Dufu') and Notion VTEC Bhd ('Notion') — both produce components for HDD, while the latter also makes components for single-lens reflex (SLR) cameras. For more on technology stocks, go here.

Based on Table 1 below, we can see that Eng is trading at a lower PER than JCY. Between the 2 smaller players, Dufu trades at a lower PER multiple than Notion.


Note: Closing prices as at Mar 9, 2010.
Table: HDD players' results for QE31/12/2009 & QE31/12/2008

The financial position of Eng & Dufu are fairly satisfactory. As at 31/12/2009, Dufu's current ratio & total debts to shareholders' funds stood at 1.9 times & 0.34 time, respectively. At the same time, Eng's current ratio & total debts to shareholders' funds stood at 1.9 times & 0.29 time, respectively. The attractive valuation may explain why Eng has risen sharply for the past one year, from a low of RM0.50 to the present price of about RM2.40. Dufu's price run-up has been a subdued affair, rising from a low of RM0.30 in early 2009 to the present price of RM0.55. Based on the above, I believe Eng & Dufu could continue to see buying support & higher prices ahead.


Chart 1: Eng's monthly chart as at Mar 1, 2010 (Source: Tradesignum)


Chart 2: Notion's weekly chart as at Mar 8, 2010 (Source: Tradesignum)


Chart 3: Dufu's weekly chart as at Mar 8, 2010 (Source: Tradesignum)

4 comments:

Layman said...

Dear Alex,

Thank you for your analysis. I got your point. Good day.

Layman said...

Dear Alex,

Sorry to trouble you again. Hope to hear from you about KNM and KPJ. I am stucked with few lots of KNM (Bought around 0.75-1.00.).Any potential value to hold any longer? Cant decide on KPJ. Thanks.

MaxWealth88 said...

eng and dufu .. really fly today!! seems like tech stocks are in play now after a long slumber.

knm ... seems like market is not buying into the GO story. jz my observation ..

cheers!

Alex Lu said...

Hi Layman,

KPJ has gone up from RM0.40 in 2002 to RM2.80 in Jan 2010. These prices were adjusted for the recent corporate exercise of 1-to-2 share split, followed by a bonus of 1-for-4. The basic full-year EPS is now about 19 sen and KPJ (closed at RM2.62 yesterday) is now trading at a PER of 14 times. It is possible that it may trade up to a PER of 15-18 times due to its steady growth. If so, KPJ may still go up by 10-30% from here.

KNM had a similar strong run-up, rising from less than RM0.10 in 2003 to a high of RM2.50 in 2007. Ever since it paid RM1.7bil (350 million-euro) to acquire Borsig, the Germany-based process equipment maker in 2008, KNM has been under the cloud. Investors have turned skittish on this group over the high price paid for Borsig & subsequent costly financing packaging. Even its recent announcement of a 'MBO' was poorly received. However, it is good to note that EPF is buying into KNM. EPF is a shrewd fund manager, known to have a good nose for a good deal. Maybe you can join in & piggy ride on their investment in KNM.