Xingquan International Sports Holdings Ltd ('Xinquan') is involved in the manufacture of shoe soles; outdoor & indoor sports & leisure shoes; outdoor & indoor sports & leisure apparels & accessories.
Recent Financial Results
The results for the 6-month ended 31/12/2009 shows that Xinquan's net profit increased by 20% from RM45.1 million to RM53.9 million, while turnover increased by 53% from RM204 million to RM311 million. I have appended below the results for FY2006 to FY2009 for your perusal. We can see that Xinquan recorded a net profit (before translation forex gain) of RM93.0 million for FY2009. This translates to a full-year EPS of 30 sen (based on issued share capital of 307.33 million shares).
Table: Xinquan's results for FY2006-9
Valuation
Xinquan (now trading at RM1.22) has a PER of 4.1 times. Based on its strong earning growth over the past 3 years (averaging about 90% over 3 years or 41% in the past year alone), Xinquan's low single-digit PER means that the stock is very attractive.
Technical Outlook
From the chart below, we can see that Xinquan has just broken above its downtrend line at RM1.18-20. This breakout could mean that the stock may either move sideway (instead of sliding further) or enter into an uptrend.
Chart: Xinquan's daily chart as at Mar 12, 2010_4.00pm (Source: Quickcharts)
Conclusion
Based on good financial performance, strong earning growth, attractive valuation & positive technical outlook, Xinquan could be a good stock for medium-term investment.
(Warning: Despite the above positive comments, we must be cautious taking long position in Mainland Chinese stocks due to the high incidence of accounting irregularities.)
15 comments:
Hi Alex,
Mind to share your view on ENGTEX?
Hi Lim,
Recently, I have touched on Eng briefly. I have posted on Eng in August 2009. The links are licted below:
http://nexttrade.blogspot.com/2010/03/eng-dufu-cheaper-hdd-players.html
http://nexttrade.blogspot.com/2009/08/eng-may-be-another-good-long-term-buy.html
Hi Alex,
Thanks. Not "Eng" but "ENGTEX" (5056) from Trading & Serives Industry.
BR
Hi Alex,
Which one have better value?
a) Cost RM1.00 with EPS of RM0.30; or
b) cost RM3.00 with EPS of RM0.90
Thanks
Bought Xinquan few months ago...
The P/E and EPS are really attractive.
Dear Alex,
Wonder why E&O share go lower even company post profit. Will the share go as low as RM0.86 like on 30 Nov 09 low and good to buy by then?
Thanks a lot!
How do you think of ,SUPERMX, HELP and PANTECH stock in long term ?
Hi Lim,
Sorry for the mixed up.
Engtex is a one-stop solution provider for pipes, valves and fittings in Malaysia. It manufactures cement-lined pipes and fittings; pipe asphalt/coatings and bitumen products; cast foundry manufacturing of valves, fittings, manhole covers and pillar hydrant; steel welded wire mesh, hard-drawn wire etc.
For FYE31/12/2009, Engtex's net profit dropped to RM22.7 million from RM30.4 million on the back of a drop in turnover from RM752 million to RM600 million. Thus, EPS dropped from 15.8 sen to 11.6 sen. As such, Engtex is trading at a PER of 8 times. The stock may trade up to a PER multiple of 10 times.
Engtex is now resting horizontal support of RM0.95, which is happened to be the medium-term uptrend line support too.
Based on inexpensive valuation & good technical support, Engtex may be a good stock for long-term investment.
Hi Ally,
Both stocks in your example would yield similar PER of 3.3 times. As such, they are equally attractive. However, it is quite rare to find two stocks that are equal in every way. So two stocks that have similar PER may differ in the following manner:
1) industries
2) sub-sectors
3) historical & potential growth
4) financial position
5) management capability
6) investor relation management
7) stock's historical price movement
The differences would account for the out-performance or under-performance of a stock vis-a-vis another.
Hi Kit,
I think the recent poor performance in E&O share price is due to its high valuation. E&O reported its results for 9-month ended 31/12/2009, where its net profit jumped from $6.9 million to RM27.1 million on a 25%-increase in turnover from RM223 million to RM279 million. This gives the stock an annualized EPS of 3.4 sen. As such, E&O is now trading at a PER of 28 times. This high PER could lead to under-performing share price for the next few quarters.
Chartwise, it may have broken marginally below the 200-day SMA line at RM0.98-99. While the stock may find support at the congested area of RM0.75-95, a break below the 200-day SMA line points to bearish outlook ahead. In such scenario, one would normally reduce his position in this stock & move on.
However, I understand that E&O is enjoying good sales for its recent launches. This may translate to better results in the next financial year.
Hi Cheer,
I will give you the technical take on the 3 stocks:
1) HELP
It broke above its Oct 2007 high of RM2.02 today on extremely thin volume. It has been rising from the low of RM0.85 in Dec 2008 on thin volume. A thinly traded stock is always a tricky proposition. If you can stomach the high risk, you can try to trade on this breakout above the all-time high now. Otherwise, a slightly safer trade is on a pullback to the 100-day SMA line at RM1.80.
2) Supermx
You may see a bearish engulfing pattern on the weekly chart. It seems to coincide with a "double-top" at RM6.20-30. The stock may pull back to the 50-day SMA line at RM5.40.
3) Pantech
This stock is likely to trade sideway. It is either trapped within a symmetrical triangle (with support & resistance at RM0.92 & RM0.99 respectively) or met the condition for a short-term downtrend with a lower 'high' & a lower 'low' sighted. A safer approach to this stock is to wait for an upside breakout above the RM1.00 level- both a breakout of a psychological level or the symmetrical triangle.
Hi Alex,
Many thanks for your sharing...
Hi Alex
As you said Xinquan is one of the cheapest stocks in terms of P/E ratio. Its share price has been depressed for so long. What are the reasons? If you are the controlling shareholder, what would you do to make the share price go up to benefit all the shareholders?
Hi Alex, Xinquan is now down to RM1 today, is now the right time to buy in & is it worth for us to hold it for long term?
Thanks for your sharing & time!
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