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Monday, August 13, 2012

Success broke above its downtrend line



Technical Breakout

Success broke above its long-term downtrend line at RM0.97 as well as its ascending triangle at the same level. With this breakout, Success has a high probability of starting its upleg. While the breakout is on thin volume, I feel that this a genuine breakout. Its immediate resistance is at the horizontal line at RM1.10.


Chart 1: Success's weekly chart as at August 10, 2012 (Source: Quickcharts)

Recent Financial Results

Success should be issuing its results for QE30/6/2012 soon. At this moment, the latest results is for QE31/3/2012. Its net profit declined by 4.7% q-o-q but rose 7% y-o-y to RM5.6 million. Revenue was similarly lower by 16% q-o-q but rose 22% y-o-y to RM64 million. From Chart 2, we can see that despite a steady rise in turnover, the company's bottom-line was flattish due to declining profit margin.


Table: Success's last 8 quarters' results


Chart 2: Success's last 20 quarters' results

Valuation

Success (at RM1.05) is now trading at a PE of 4.8 times (based on last 4 quarters' EPS of 21.96 sen). Success, being a smallcap, could command a PE of 6 times.

Conclusion

Based on bullish technical outlook, reasonable valuation & satisfactory financial performance, Success could be a good stock for long-term investment.

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