Friday, March 29, 2013

Tecguan- hit by weaker CPO & cocoa prices

Result Update

For QE31/1/2013, Tecguan incurred a pre-tax los of RM15.9 million on a revenue of RM35.8 million. Its profit attributable to shareholders came in at RM23.4 million after it recorded a surplus of RM39.3 million from the revaluation of land, building & biological assets.


Table 1: Tecguan's last 8 quarterly results

Looking at Chart 1, we can see that Tecguan's losses for the current year was due to losses from both its Oil Palm & Cocoa products division. This is a complete reversal from last year when both divisions recorded positive result. How did Tecguan record a loss in the Oil Palm division?


Chart 1: Tecguan's Segmental Performance for 9-month for FY2013, FY2012 & FY2011


Chart 2: Tecguan's last 23 quarterly results

Financial Position

Tecguan's financial position as at 31/1/2013 is deemed weak, with current ratio barely above unity and gearing ratio at an elevated level of 0.82 time.

Valuation

Tecguan (closed at RM0.67) is now trading at a PB of 0.4 time (based on NTA of RM1.68 ps. as at 31/1/2013). Being a loss-making company, Tecguan does not have a PE ratio.

Technical Outlook

Tecguan is in a long-term downward channel. In addition, the stock is range-bounce between RM0.50 & RM0.80.


Chart 3: Tecguan's monthly chart as at Mar 28, 2013 (Source: Tradesignum)

Conclusion

Based on poor financial performance, weak financial position and poor technical outlook, I revise the rating for Tecguan to a SELL.

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, Tecguan.

6 comments:

vincent chua said...

Hi Alex,

1. What do you think of Zhulian technically after last 1 year good run?

2. When you analyse a stock with a breakout based on technical analysis and recommend a buy, it seems that you put little consideration on the overall market index performance. Don't you think this is important as well even though each stock has its own characteristic?

Ethan Lee said...

Hi Alex,

Can you please comment about DIJACOR?

Thank you.


Ming Soon said...

Hi, Alex,

Your analysis is easy and detail for understand, can you analyst RCE capital?

Alex Lu said...

Hi Ming Soon

RCECap has dropped quite a bit. It tested the horizontal support at RM0.23-0.24 and recovered some.

Its earning is about 4.4 sen. Thus at 0.265, RCECap is trading at a PE of 6 times.

It is not a very exciting stock. If you are not in it, you may skip it. If you are in it, you may want to hold & wait for a swing up to RM0.30-0.31 to exit.

Alex Lu said...

Hi Ethan Lee

The fundamental story for DIJACOR is interesting. It appeared in the Edge last week.

The chart shows a stock that is dull for long period, visited by sudden activities that were accompanied by sharp rallies that did not last. Would the current rally be an exception or would be more of the same? Who knows?!

Alex Lu said...

Hi vincent chua

Zhulian looks tricky. The current recovery could set the stage for a double top if it failed at the RM2.90 mark. I am inclined to take some profit on this one.

Your next question: When you analyse a stock with a breakout based on technical analysis and recommend a buy, it seems that you put little consideration on the overall market index performance. Don't you think this is important as well even though each stock has its own characteristic?

That's a good question. The answer is Yes, I do. If I do not post anything, even when there are many breakouts, it is because I am convinced of the breakouts or I do not feel comfortable with the market. When I post a BUY call, I am comfortable with the market or convinced that the stock has a decent chance of going up.

I expect the readers to have their own compass and exercise their discretion as well. All in all, I hope my calls have worked well for you.