For QE31/5/2013, Topglov's net profit dropped by 20% q-o-q or 25% y-o-y to RM40 million while revenue inched higher by 5% q-o-q but remained unchanged y-o-y at RM604 million. The slight growth in revenue was the "result of expansion in demand and further improvement in efficiency from better utilization of production capacity". Bottom-line dropped due to decline in profit margin due mainly to "a more competitive pricing structure and the adverse movements in foreign exchange which resulted in the recognition of unrealized losses of RM10.9 million from value on its USD foreign exchange forward contracts and AUD fixed income investments. Compared to the preceding quarter, the unrealized loss amounted to RM1.4 million only".
Note: If the unrealized forex losses are excluded, Topglov's pre-tax profit still declined from RM62.8 million in QE31/1/2013 to RM54.3 million in QE31/5/2013- a drop of 13.5%.
Table: Topglov's last 8 quarterly results
Chart 1: Topglov's last 28 quarterly results
Valuation
Topglov (closed at RM6.35 yesterday) is now trading at a PE of 18.7 times (based on last 4 quarters' EPS of 34 sen). At this PE multiple, Topglov is overvalued.
Technical Outlook
Topglov has nearly revisited its high of RM6.88 in 2010. Its immediate resistance will be the horizontal line at RM6.80 & its support would be the horizontal line at RM5.60.
Chart 2: Topglov's weekly chart as at June 13, 2013 (Source: Quickcharts)
Conclusion
Based on demanding valuation & strong technical resistance, Topglov is rated SELL INTO STRENGTH.
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, Topglov.
2 comments:
Hi Alex..
Recently i paid attention to an under perform counter, MHB Berhad. Its price dropped to historic low before slightly rebound to RM3.38 (after dividend ex on 14/6).
Can you please analyze this counter, whether it is now an opportunity to invest into MHB?
Thanks!
Hi cherng
Thank you for pointing out MHB. It has a big volume recently- indicating one or more substantial shareholders has/have thrown in the towel(s). We will wait for a short while to see whether the result may improve; thus justifying a constructive stand for the stock. Alternatively, we would like to see the share price breaks above its intermediate downtrend line at RM3.60 signaling a possible end to the downtrend.
BTW, its net profit for FY2012 dropped from RM334 mil to RM242 mil while for 1Q2013, net profit dropped from RM78 mil to RM51 mil.
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