Recent I've posted on the fantastic rise of SEG (go here). SEG had earlier proposed a 1-to-2 Share Split, a 2-for-5 Bonus Issue and a Rights Issue of warrants on the basis of 1-for-2 at RM0.05 each. For some reason which I cannot fathom, the 1-to-2 Share Split and the 2-for-5 Bonus Issue were completed on July 12, while the warrant issue will be completed later, on July 22.
Recent & Historical Financial results
SEG's financial performance is affected seasonal factors, which resulted in higher top-line and bottom-line for the first calender quarter (which happens to be the first quarter for the company). We can see from Table 1 & Chart 1 below that SEG's turnover & profits are in a rising trend over the past 2 years. This has been the trend since FY2007 (see Table 2 below). Based on this trend, I have projected SEG's turnover & profits for FY2010 to be 35% & 40% higher than that of FY2009.
Table 1: SEG's last 8 quarterly results
Chart 1: SEG's last 8 quarterly results
Table 2: SEG's last 10 yearly results
Valuation
SEG (trading at RM2.43 as at 11.00 am) is now trading at a trailing PER of 46 times (based on last 4 quarters' EPS of 5.3 sen) or at a forward PER of 40 times (based projected EPS of 6.0 sen). At this multiple, SEG is grossly overvalued.
Technical Outlook
SEG is on an exponential rise! There is no sign of weakness yet.
Chart 2: SEG's daily chart as at July 19, 2010 (Source: Tradesignum)
Conclusion
Based on demanding valuation, SEG is a stock to avoid. My concern is that the current strength in the share price may not persist after the last goody- the proposed warrant issue- is completed. What's there to look forward to? Upside earning surprise is possible but it has been all priced in.
5 comments:
Dear Alex,
Is Success worth considering for a buy at current market trend?
So far after the SEB episode, the price seems less energetic.
Thanks.
Do you think cocolnd is overprice too right now?
Thanks!
Hi Kai-Foong Kok
At RM2.46 now, Cocoland is trading at a trailing PER of 15 times (based on FY2009 EPS of 16.4 sen). For a small-cap, albeit one with a promising outlook, Cocoland is deemed fully valued.
Chartwise, the stock is at an all-time high. A stock in such situation tends to go higher until it can go no more. Then the sharp pullback would set in.
You have to choose whether to go with the fundamental analysis or the technical analysis. If you are not a nimble trader (who can cut loss without patting an eyelid), I would advise you to give this a miss.
Hi Layman
Success & SEB are both looking very lethargic. If SEB can break above RM0.70 with good volume, that could be a signal for a upleg for the stock.
Thanks a lot for your advice Alex :)
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