Zhulian Corporation Berhad ("Zhulian') is principally engaged in the manufacture and sale of costume jewelry and consumer products on a direct sales basis. It distributes its products under the brand name of Zhulian within Malaysia and to Thailand and Indonesia.
Recent Financial Results
Zhulian announced its results for 1Q2010 ended 28/2/2010. Net profit increased marginally by 1% q-o-q or 48% y-o-y to RM24.9 million. Its turnover declined marginally by 1% q-o-q but rose 21% y-o-y to RM86 million.
Table: Zhulian's last 8 quarterly results
Chart 1: Zhulian's last 14 quarterly results
Valuation
Zhulian (closed at RM2.45 on April 15) is now trading at a PER of 9.4 times. It has a decent dividend yield of about 5.7%. At these multiples, Zhulian is reasonably priced. Based on PER multiple of 12 times, Zhulian's fair value is estimated to be about RM3.12.
Technical Outlook
Zhulian is in an uptrend, with support at RM1.80. I have also drawn two channel lines- the upper channel line (capping its reaction high) as well as the middle channel line. These channel lines offer support & resistance to the price movement. Since the announcement of the latest results, Zhulian has traded above the previous upper channel line at RM2.35. The present rally could go as high as RM2.65, which is arrived at by adding the distance between the upper channel line & the middle channel line (of RM0.30) to the breakout level (of RM2.35). On weakness, Zhulian may pull back & test the resistance-turned-support at RM2.35.
Chart 2: Zhulian's daily chart as at April 15, 2010 (Source: Quickcharts)
Conclusion
Based on satisfactory results, reasonable valuation (with potential upside) & bullish technical outlook, Zhulian could be a good stock for medium-term investment.
6 comments:
Dear Alex,
Eititech has been in the consolidating and forming a bottom around 0.41-0.43 for an extend period.It will be transferred to the main board next Tuesday.
Basing on the company performance and existing PE , Do you think it is a good Trading Buy for short/middle term?
Thanks.
Hi kyong,
I don't know what to say about this company, which on paper looks promising. I thought the worst would be over after one of the major shareholders had finished offloading its stock. A rebound did happen but it quickly frizzled out. From time to time, its directors & shareholders disposed their stocks in the open market. They also bought shares in the open market, but the quantity of shares sold is more than the quantity purchased. Why? Are they trading in the stock?
Technically, there are 2 things to note:
1. the support is at RM0.42-43; and
2. the stock enjoyed a small bounce every alternate month- in Jun'09, Aug'09, Oct'09, Dec'09 and Feb'10. Would it happen again this month???
Fruit for thought!
Dear Alex,
Thank you for your comment on Etitech
.Your observation on their director's trading and the alternative month's mini bouncing is clearly excellent.
I FULLY agree with you that on paper this company is quite promising. So let us monitor its movements and further development before we could decide the next move. Thanks.
Dear Alex,
Just a fruit for thought. Since the Etitech is going to the main board, the Big Shareholders may do some window Dressing to make some quick money when it is in main board next week ??
Thanks
Hi kyong,
If the market sentiment is alright, the stock may move up a bit on 'graduation' to Main Board. It is not a reliable thing, but since this stock is on schedule for a slight technical rebound, then it may increase the chance of the rebound. You should also bear in mind that if you buy now at RM0.42, you are buying the stock at its support level. If we married technical rules with risk/reward consideration, we can make a case for placing a bet on Etitech.
Dear Alex,
I have noted your excellent comments on the bet on Etitech and I understand your Technical description , and I do enjoy your writings and interesting viewpoints.
Thanks
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