EForce- poised to test its downtrend line

Background

Excel Force MSC Bhd ('EForce') is involved in the provision of software systems for stockbroking industry, such as its Cyberbroker system, Fundamental Analysis system & Investor Relation system. The other company that is involved in this business is another listed company, N2N Connect Bhd ('N2N'). EForce is listed under the Technology sector of the Main Board,while N2N is listed under the Technology sector of the ACE Board.

Recent Development

EForce & N2N will benefit from Bursa Malaysia's program of discontinuing its existing Broker Front End ('BFE') system. All stock brokers are required to acquire a replacement system and that is likely to come from these two companies. For example, Kenaga has selected EForce as our system provider. As more stockbrokers implement this changeover, both EForce & N2N are expected to see a jump in their top-line & bottom-line. 

Recent Financial Performance

I have tabulated the results for the last 2 years for the 2 companies. Without doubt, EForce is a better company when compared to N2N.


Table 1: EForce & N2N's results for FYE31/12/2011 & FYE31/12/2010

Financial Position

Financial position of both companies are satisfactory.


Table 2: EForce & N2N's financial position as at 31/12/2011 & 31/12/2010

Valuation

EForce (closed at RM0.35 yesterday) is now trading at a PE multiple of 12 times or at a Price to Book of 1.94 times. It has a dividend yield of 5.7%. On the other hand, N2N, with no dividend payout & reported losses for the past two years, has only a Price to Book multiple to show: Its PB multiple is at 3.91 times.

Technical Outlook

EForce- a quiet stock- is now testing its intermediate downtrend line resistance at RM0.35. If it can break above this resistance, the stock's next upleg may begin.


Chart: EForce's weekly chart as at April 9, 2012 (Source: Quickcharts)

Conclusion

Based on expected better results ahead & interesting technical set-up, EForce is a stock worth close tracking. If it can break above the RM0.35 level, the stock could be a good trading BUY.