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Friday, August 17, 2012

JCY crossed the tipping point

Results Update

For QE30/6/2012, JCY's net profit dropped 35.5% q-o-q to RM105 million while revenue was unchanged at RM573 million. Profit margin eroded from about 28% in QE31/3/2012 to 18% in QE30/6/2012.


Table: JCY's last 8 quarterly results


Chart 1: JCY's last 15 quarterly results

Valuation

JCY (at RM1.47) is now trading at a PE of 6.6 times (based on the last 4 quarters' EPS of 22.35 sen). While the PE multiple is relatively low, the stock is a cyclical stock which has benefited from surging demand for HDD due to the supply disruption from the Thailand flood in late 2011. If the supply chain situation normalized (and there are signs of that now), then the super-normal profit will no longer be forthcoming. With that, JCY's earning and share price should drift down.

Technical outlook

JCY is consolidating after a sharp rally. The immediate support is at the 100-day SMA line at RM1.45.


Chart 2: JCY's daily chart as at Aug 16, 2012 (Source: Tradesignum)

Conclusion

Based on the above, I would rate JCY as a SELL INTO STRENGTH.

7 comments:

Danny said...

Dear Alex, how would you rate Notion? Different from JCY, Notion has recorded a much better result than previous quarters. Thank you.

Wong Danny said...

Dear Alex, how would you rate Notion? Different from JCY, Notion has recorded a much better result than previous quarters.

Alex Lu said...

Hi Danny,

I will look at it in greater details later.

While the results for the past 2 quarters has been quite good, I am concerned that it might been a case of a catch-up in sales orders rather than sustainable sales growth. This orders catch-up could be due to delay in order fulfillment due to the earlier Thailand flood. If so, the sales could normalize after a few quarters.

Blog master said...

Hi alex. I just want to share my opinion. Although what you said is true, but there are still things you haven't consider. Yes today JCY fell bad but for some reasons, I think JCY should be recommend to HOLD. From my experience it either go up or remain the same and will re-decide later whether to sell or not depending on the Q4. Q3 is not bad either, revenue remain the same and from the report it says they used some $$$ for expansion, thats why EPS not so good.

Mat Cendana said...

You are right about the tipping point. But not many would have thought that JCY could come down this much! Wednesday's fall was bad enough and one would have thought there would be a mild rebound or that it remains stagnant. But to see it losing 17 sen at this moment to 1.17... shocking!

Had thought about buying when it was at 1.35 yesterday. Fortunately I didn't (left the trading screen and went to the Bookfest at KLCC instead). But I'm really surprised by the sharp drop. The quarter report might not be as good as the previous one but no one can say it was "bad"(?).

At its current price, I wonder if this is a good opportunity to buy and wait it out. Or is this the notorious falling knife where "cheap" will become "cheaper"?

Alex Lu said...

Hi Mat Cendana

I was at the Bookfest on Monday. My girls bought a few books.

The drop in JCY is sharper than I expected. What's a good price to try for a rebound? I think the psychological level of RM1.00 could be a good level to try. Good luck!

Alex Lu said...

Hi Blog master

Actually, my rating of "sell into strength" was wrong. It should have been to "reduce". The difference is that even if the price did not rebound when I made the call, one should still sell some of their position in the stock. In actual fact, that was what happened- there was no bound!