Tuesday, May 22, 2012

WingTM has broken above its downtrend line


Wing Tai Malaysia Bhd ('WingTM') is involved in property development & investment, retailing & manufacturing. The main segments are property development & retailing.

Technical Breakout

WingTM broke above its intermediate downtrend line at RM1.65-1.70 on May 10. Despite the poor market sentiment over the past few days, the share price remained firm at RM1.70. Yesterday, the stock rallied in the afternoon session to close at RM1.80. 

Chart 1: WingTM's daily chart as at May 22, 2012_10.00am (Source: Quickcharts)

The last time WingTM broke above a similar intermediate downtrend line was in July 2010, where it chalked up a gain of 45% from the breakout level of RM1.25 to a high of RM1.80. If it can achieve the same gain of 45%, the stock may touch RM2.46. That would nearly coincide with the horizontal resistance at RM2.50 (see weekly chart below).

Chart 2: WingTM's weekly chart as at May 22, 2012_10.00am (Source: Tradesignum)

Recent Financial Results

WingTM had announced its results for QE31/3/2012. Its net profit declined by 22.5% q-o-q but increased by 31.5% y-o-y to RM24.3 million while turnover had similarly declined 6.5% q-o-q but rose 21.4% y-o-y to RM116.7 million. The q-o-q decline in top-line & bottom-line was attributable to lower sales in the retailing segment as compared to the immediate preceding quarter (QE31/12/2011) which benefited from higher sales due to festive season & year end school holidays. Similar declines were witnessed in the property investment & manufacturing segments. The segment which saw improvement was the property development segment where top-line & bottom-line rose on q-o-q basis but that was not enough to make up for the combined decline of the other three segments.

Table: WingTM's last 8 quarterly results

Chart 3: WingTM's last 16 quarterly results


WingTM (closed at RM1.80 yesterday) is now trading at a PE of 4.6 times (based on last 4 quarters' EPS of 39.38 sen). However, the EPS was inflated by the inclusion of a one-off tax credit of RM21.2 million. If this is excluded, the last 4 quarters' EPS would be lowered to 32.6 sen. This would push the PE multiple up slightly to 5.5 times. Even at this PE, WingTM is deemed inexpensive.


Based on good financial performance, attractive valuation & positive technical outlook, WingTM could be a good stock for medium-term investment.


gwynwelsh said...

Dear Alex,

What do you think of Gas Malaysia? It seems to be a good counter to buy for its dividends.

Alex Lu said...

Hi Gwynwelsh,

I have just studied the prospectus of Gas Malaysia. I would put the EPS at a range of 8-10 sen for FY2012. The uncertainty which led to the range is:

1) When would the new selling price, cost price & margin kick in? Margin is supposed to drop to 11.5% in 1/12/2011 but it has not been implemented yet!
2) What will be the growth in sales volume for FY2012?

If I chose to be generous and assume the new pricing will not kick in for FY2012 and factor in a volume growth of 10%, the net profit could be RM126 million and EPS about 10 sen. If I chose to be less generous and assume the new pricing will kick in on 1/7/2012 and no sales volume increase (unlikely!), then the net profit could be RM100 million and EPS about 8 sen.

If we used Petgas's PE multiple of 24 times but factoring in a discount of 10%, then the value of Gas Malaysia would be in the range of RM1.72 and RM2.16.