Wednesday, January 25, 2012

SMRTech- a promising IT stock


SMR Technology Bhd ('SMRTEch') is involved in the provision of IT solutions for human resource development. It recently secured a 1-year contract of RM14 million from the Human Resources Ministry (here). This is on top of a 3-year contract of RM89.5 million secured in 2010 from the Ministry of education for the recruitment & management of English language teaching consultants and to implement the In-Service Teacher Training for English Language Teachers (ELT) in primary schools (here).

Recent Financial Performance

SMRtech's financial results for QE30/9/2011 is deemed satisfactory with net profit of RM2.3 million while turnover is at RM10.7 million. From Chart 1 below, we can see SMRTech's top-line & bottom-line have soared in the past 6 quarters.

Table: SMRTech's last 8 quarterly results

Chart 1: SMRTech's last 14 quarterly results


SMRTech (closed at RM0.215 on Friday) is now trading at a PE of 4.5 times (based on last 4 quarters' EPS of 4.8 sen). At this PE multiple, SMRTech is deemed fairly attractive.

Technical Outlook

SMRTech broke above its downtrend line at RM0.15 in second half of 2011. The horizontal resistance at RM0.20 has capped its rise for the past 9 months. Last week, the stock broke above the RM0.20 mark. This may signal the begin of a play for the stock. First target is RM0.25. Second target is RM0.35.

Chart 2: SMRTech's weekly chart as at Jan 16, 2012 (Source: Tradesignum)


Based on satisfactory results, large contracts in-hand, undemanding valuation and positive technical outlook, SMRtech could be a good trading BUY.

No comments: