JCY has just announced its results for QE30/9/2010. It's a disappointing set of results with JCY incurring a net loss of RM22.6 million as compared to a net profit of RM55.6 million for QE30/6/2010 or RM73.5 million in QE30/9/2009. Its turnover was relatively unchanged at RM486 million. The company attributed its poor performance to unfavorable exchange rate, lower average selling prices, and higher raw material & labor costs.
Table: JCY's last 7 quarterly results
Chart 1: JCY's 7 quarterly results
Financial Position
JCY's fiancial position as at 30/9/2010 is deemed satisfactory, with current ratio at 1.4 times & debts to equity ratio at 0.4 time.
Technical Outlook
JCY is in a downtrend line, with resistance at RM0.95-0.97. It just broke below the horizontal support of RM0.88, which was its previous low. The stock could potentially test the parallel line support at RM0.60.
Chart 2: JCY's daily chart as at Dec 1, 2010_9.05am (Source: Quickcharts)
Conclusion
Based on poor financial performance & bearish technical outlook, JCY should be avoided for now. The catalyst for a re-rating would be improved financial performance which would signal the end of a slowdown in HDD demand. For those with a contrarian approach & willing to take some risk, you may try slow buying at the potential support of the parallel line at RM0.60.
6 comments:
Hi Alex, please share your inputs on Luxchem. Does it have untapped value or is it just another smallcap company with fairly decent results? Thanks!
hi alex,
may i know whether i'm still entitle for the dividen if i sell the share on the 'X' date or only after that?
Hi ks
You are entitled to the dividend (or, entitlement) if you have not sold the share on the last cum-date. What's the last cum-date? That's one trading day before the ex-date. Indirectly, if you sell the share on the ex-date, you are still entitled to the dividend or entitlement.
Hi AlexP
Luxchem is a profitable smallcap company involved in the manufacturing and trading of unsaturated polyester resin and related products, import and distribution of chemical and petrochemical products.
It made a net profit of RM14.8 million on turnover of RM291 million for 9-month ended 30/9/2010. If we analyzed its 9-month EPS of 11.4 sen, its full-year EPS would be about 15.2 sen. Its current PE is about 6.5 times. Reasonable valuation, with potential upside of 23% if we give this smallcap a PE of 8 times.
Its financial position as at 30/9/2010 is healthy, with adequate liquidity (current ratio of 2 times) & average debt to equity of 0.5 time.
However, the stock is now trading sideway, between RM1.05 & RM1.15. Until a new direction is set, the stock's outlook would be unexciting.
Hi Alex,
On JCY, it was reported that the IPO proceeds of RM750 million goes directly to its founder instead of the company itself (as opposed to the case of Notion's IPO proceeds). Does this post a significant risk in evaluating the company?
Hi rob
When a company is listed on Bursa, it has to arrange for its shares to be offered to the Public. This achieved the objective of having a certain level of public spread. This offer can be a Public Issue, which means that the company will issue new shares to the public & it will in turn receive money, or it can be an Offer for Sale by its existing shareholders, in which case the company will not issue any new shares & it will not receive any money. Most IPOs are a combination of both these methods of offering.
It is not quite correct to say that one method is more risky than the other method. However, the fact that the existing shareholders are prepared to part with their shares carries some negative connotation. In addition, the listing does not serve to bring in fresh money to grow the company's business does imply that the growth potential is limited. However, these are general assumptions & there are cases of good companies listed where the shares offered are from the existing shareholders.
Post a Comment