Tuesday, April 10, 2012

LPI- time to take profit

Results Update

For QE31/3/2012, LPI's net profit dropped by 20% q-o-q or 19% y-o-y to RM31.5 million while its revenue increased by 3% q-o-q or 15% y-o-y to RM246 million. The decline in its bottom-line is attributable to higher claims incurred & lower net earned premium.


Table: LPI's last 8 quarterly results

From Chart 1, we can see that LPI's top-line has been rising for the past 25 quarters. While its bottom-line has also been on an upwards trajectory, it has slid in the past two quarters. From Chart 2, we can see that the 4-quarter SMA lines for pre-tax & net profit have hooked down for the first time in the past 22 quarters. Is this an one-off decline (which normally coincided with the seasonally weaker 1st quarter) or is it the end of its unbroken growth track record? We will wait & see.


Chart 1: LPI's last 25 quarterly results


Chart 2: LPI's bottom-line for last 25 quarterly results

Valuation

LPI (closed at RM13.98 yesterday)  is now trading at a PE of 21 times (based on last 4 quarters' EPS of 66.88 sen). At this PE multiple, LPI is priced to deliver continuous growth. A break in the growth track record as seen in the past two quarters could result in a re-rating to the downside.

Technical Outlook

LPI has been trading in a sideway manner for the past one year. Its resistance is at the horizontal line at RM14.25. Its immediate support levels are at RM13.00, RM12.00 & RM11.50.


Chart 3: LPI's weekly chart as at April 9, 2012 (Source: Tradesignum)

Conclusion

Based on unexciting technical outlook, high valuation & potentially challenging financial performance ahead, I think it is good time to reduce our position in LPI.

9 comments:

Ho Lee Man said...

Hi Alex,
Pls provide your view and comments on WCT's intrinsic value ,PE and price trend.
I bought WCT at RM1.50 ,with news on OCBC increasing its shareholdings.
However ,like most Construction counters prices are sliding down.
Looking forward to your comments.
Thanks

Andy Lau said...

Hi Alex

Seek your explanation

1. The relationship between the ADX and MCAD as I don't understand why sometimes ADX move higher but MCAD still remain as it is.

2. If ADX (14d, indicated by blue line) move higher than +DI (green line) as shown at this link ( http://adf.ly/7IqMA ). What is the hidden message ?

TQ

luckystock2 said...

Hi Alex,
Can you comment on CBIP fundamental and technical outlook? It looks like a good buy for me.
Tx!

investor said...

Hi Alex, I would like your input on Masteel. It looks attractive with it hovering at 1.02-1.08 recently. Just wondering if current price worth to buy if I aim for medium/long term investment. Thx

cheer said...

Hi Alex,

Is SAM current price expensive?

Alex Lu said...

Hi Ho Lee Man

WCT at RM2.46 is trading at a PE of 12 times (based on FY2011 EPS of 20 sen). That's a fair PE multiple, with room for a 10-20% upside (depending on contracts to be secured).

Chartwise, it is trading at the strong support of RM2.40-2.45. The support comes from the horizontal line & the medium-term uptrend line.

Alex Lu said...

Hi Andy Lau

I can't explain ADX in a simple comment. It took me many months to fully absorb it. I read my notes a few times before it sank in.

You can do the same by reading what is out there on the net. Your progress or understanding will be better if you practice it by looking at charts overlaid with ADX everyday. In Tradesignum, it is referred to as Average Directional Index.

Alex Lu said...

Hi luckystock2

I agree with your assessment on CBIP. Its technical outlook is still positive, with support at RM2.40 & resistance at RM2.80.

The company has sold off its estates which may be a good move. This will free up its funds to expand into its engineering/manufacturing side. I keep reading about plantation companies expanding their estates and I get very uncomfortable with the huge capacity coming on stream over the next few years. CBIP can just concentrate on building palm oil mills to cater for all these estates & reap the benefit.

Alex Lu said...

Hi cheer

I have no comment on SAM. I am familiar with it.