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Wednesday, October 31, 2012

PWRoot- time for some profit-taking

Results Update

For QE31/8/2012, PWRoot's net profit increased by 17% q-o-q or 257% y-o-y to RM9.1 million while revenue was mixed- up 19% y-o-y but dropped 11% q-o-q to RM62.6 million. Revenue dropped q-o-q due to lower sales, domestically & overseas while net profit increased due to gain on sale of property of RM2.1 mil. If the exceptional gain is excluded, net profit would drop by 10% to RM7.0 million.


Table 1: PWRoot's last 8 quarterly results


Chart 1: PWRoot's last 27 quarterly results

Valuation

PWRoot (closed at RM0.99 yesterday) is now trading at a PE of 11.5 times (based on last 4 quarters' EPS of 8.6 sen). If the exceptional gain from the disposal of a property is excluded, the last 4 quarters' EPS would drop to 7.9 sen and the trailing PE would rise to 12.5 times. At this PE, PWRoot is deemed fairly valued.

Technical Outlook

PWRoot is now hanging onto the psychological support of RM1.00. If this support is violated, the stock's next support is at the horizontal line RM0.92 and thereafter at RM0.67. The indicators are weakening and that signals increase the probability of a breakdown of the psychological RM1.00 support. 


Chart 2: PWRoot's weekly chart as at Oct 30, 2012 (Source: Quickcharts)

Conclusion

Based on good financial performance, PWRoot is a good stock for long-term investment. However, the valuation is no longer cheap and the stock's technical outlook is mildly negative. As such, taking profit on this investment may not be a bad idea.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, PWRoot.

2 comments:

Ethan Lee said...

Hi Alex, please advise technical outlook for SKPRES. Now 36.5 cents. Thank you.

Alex Lu said...

Hi Ethan Lee


SKPRes may have a breakout at RM0.37. It broke above the strong horizontal line at RM0.37, hit a high of RM0.38 & it is hovering around RM0.37. Will it continue to rise from here? Who knows.

However, if you look at SKPRes-WA, the warrant is trading in a downtrend since its listing in July 2012. The divergence between the share & the warrant could be a negative signal for the stock.