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Monday, July 09, 2012

SEG poised for a breakout?

Background

The proposed takeover of SEG by Pinnacle heritage Solutions Sdn Bhd at RM1.714 per share & RM1.214 per warrant was not successful (here). Nevertheless, it received good acceptance of 66% & 69% respectively (here). The company will continue to be listed on te exchange.


Recent Financial results

SEG's net profit increased by 23% q-o-q or 21% y-o-y to RM21.9 million while its revenue increased by 10% q-o-q or 14% y-o-y to RM78 million.


Table: SEG's last 8 quarterly results


Chart 1: SEG's last 16 quarterly results

Valuation

SEG (closed at RM1.94 today) is now trading at a PE of 13.3 times (based on last 4 quarters' EPS of 14.56 sen). For a company with a CAGR of 25% over the past 3 years (based on turnover), its PEG ratio is about 0.53 time. At that PEG ratio, SEG is deemed fairly attractive.


Technical Outlook

SEG has been consolidating in an oval shape pattern for the past 18-20 months. A breakout to the upside (or downside) would point the way forward for the stock. Its MACD & RSI have attempted to break to the upside recently. Are they signaling the possible breakout to come?


Chart 2: SEG's daily chart as at July 6, 2012 (Source: Tradesignum) 

Conclusion

Based on good financial performance, stable industrial outlook and attractive valuation, SEG is a good stock for long-term investment. It could be a trading BUY if it could break to the upside of the oval shape consolidation pattern (at RM2.00).

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