Thursday, February 09, 2012

JCY- time to take profit

Results Update

JCY reported its results for QE31/12/2011. Its net profit soared 514% q-o-q or 20-fold to 162 million while turnover increased by 27% q-o-q & y-o-y to RM559 million. JCY has obviously benefited from sharp increase in the prices of HDD parts or components due to the flood in Thailand in October & November last year. Unlike its competitors, JCY was extremely fortunate as its plants were not located in Thailand.

From my personal checking, the supply in the HDD sector should be normalized by June this year. If so, JCY can expect to have another two good quarters, i.e. QE31/3/2012 & QE30/6/2012.


Table: JCY's last 8 quarterly results



Chart 1: JCY's last 13 quarterly results

Valuation

JCY (closed at RM1.41 yesterday) is now trading at a PE of 18 times (based on last 4 quarters' EPS of 8 sen). We should avoid using the abnormal EPS for the latest quarter to compute the PE ratio as this level of earning will soon subside. At the PE multiple of 18 times, JCY is deemed fully valued.

Technical Outlook

JCY has risen very sharply over the past 4 months, from a low of RM0.40 to a present price of RM1.40. While the uptrend is intact, there are signs of bearish divergence in the volume & some of the indicators (MACD, RSI & Stochastics). These signs are early warnings that the share price may be topping out soon.


Chart 2: JCY's daily chart as at Feb 8, 2012 (Source: Tradesignum)

Conclusion

Based on limited upside in the valuation & weakness in the technical indicators, I believe one can start to take profit on the stock.

13 comments:

newbie said...

Dear Alex,
Could you please enlighten me about LCTH?Though company did not make money in the last quarter,it's expecting situation to be better off in the coming quarter due to the work that has started in the new factory.According to its quarterly reports,it has a net cash of about 88 million and a NTA of 52sen based on a paid up 360million.This is in excess of 24sen of cash in hand compared to its share price of 21sen!Could I have interpreted wrongly or is something brewing looking at the volume today?
Thank you in advance for your valued comments.

Sap Sui said...

Hi Alex,

What do you think of Tebrau. I've been holding it since at 0.775 and all this takeover thing really makes me jump.

I think Tebrau is a good company tho. Your opinion please? Any TP if you don't mind.

Thanks.

www.greenworldbvi.com said...

Hi Alex: I am American but have an Asian trading account that allows me to access stocks in the region. You said its time to take profits in JCY, but also that it still has good upside potential?

Alex Lu said...

Hi newbie

LCTH is building a new plant for its central region. The cash reserve is meant for that project.

The company has been losing money for many quarters. Can the new plant and its cost-cutting measures turnaround its fortune? We will have to wait & see.

Alex Lu said...

Hi Sap Sui

I share your sentiment on Tebrau. The takeover price is unattractive and it is not likely to be well-received. The sponsors are not keen on privatizing the company but the GO was triggered by the acquisition of another company.

On the whole, I feel that the potential of Tebrau is very good. However, the management does not seem to be capable for fully realizing that potential. The management team lacks the dynamism found in Mahsing of SPSetia. Hopefully, that will change soon.

Alex Lu said...

Hi www.greenworldbvi.com

You commented that I've written that "its time to take profits in JCY, but also that it still has good upside potential".

I cannot find anywhere in my post where I wrote that "(JCY) still has good upside potential". If it has good upside potential, then we should hold onto it. I think you were refering to the phrase "JCY can expect to have another two good quarters, i.e. QE31/3/2012 & QE30/6/2012".

Smart money does not wait for profit to peak before selling. I suspect the selling has started & will continue for the next few months. Once JCY's competitors are up & running, the prices of HDD parts & component will revert back to normal. As such, the best time to sell is now.

luckystock2 said...

Hi Alex ,
Can you comment on Naim? Does the counter just resuming uptrend?
Tx!

newbie said...

Dear Alex,
Thanks for your comments.Insightful,as always.Appreciate your help.Thanks again.

fahloong said...

Dear Alex,

how you determine that for JCY at PE 18 is fully valued. any guidiance for that PE is consider high. Pls advise,

Thanks,

Sam

fahloong said...

Dear Alex,

How to determine PE that consider high?? for example JCY you mention that PE 18 is fully valued.
pls advise.

Thanks,

Sam

Alex Lu said...

Hi newbie

LCTH has been sliding for a while (since 2007). Even with good financial position, investors are deterred to buy the stock as it has been incurring losses for many quarters.
The question to ask is why has LCTH cutback on its dividend payout despite sitting on a huge cash reserve. Is it intended for expansion?

The dividend track record is as follows:
FY2004- 8.56 sen
FY2005- 8.00 sen
FY2006- 6.00 sen
FY2007- 2.25 sen
FY2008- 1.75 sen
FY2009- 1.78 sen

There were no payout for FY2010 & FY2011.

Chartwise, it is in a long-term downtrend line with resistance at RM0.30. a short-term uptrend line has formed where its support is at RM0.20. Immediate resistance level is at RM0.24-0.25.

When a stock raised too many questions, the best thing to do is to wait for the chart to turn positive.

Alex Lu said...

Hi Sap Sui

When the story of Tebrau, Danga Bay & the JB waterfront development broke out in January, I asked myself this question: If this is such a great thing, why did it stay quiet for so long? For that matter, why did it take so long for Iskandar to takeoff? Is it political issue? Are we dependent on Singaporean buyers to take up the bulk of the properties to be developed? If so, are Singaporean not buying because they feel not safe in JB?

The market has high regards for Lim Kang Hoo & Ekovest but that may not be enough to turn the tide. The entire JB waterfront development is huge & pricey. Without outside buyers (especial Singaporean), it will not succeed.

Alex Lu said...

Hi www.greenworldbvi.com

I don't think so. Fortunately or unfortunately, the stock- which dropped earlier- had rallied back up recently.