Engtex had a sharp rally over the past two months. It has just tested its strong horizontal resistance at RM1.15. On the way up, it broke through two strong horizontal resistance at RM0.98 & RM1.05. As you can see, the uptrend move is in a steep angle which raises concern of sharp pullback.
Chart 1: Engtex's weekly chart as at July 8, 2013 (Source: quickcharts)
Recent Financial Result
From the table below, you can see that Engtex's bottom-line rebounded in QE31/3/2013. In QE31/12/2012, it reported a small loss due to the increased construction cost in its two ongoing property development projects in Selayang and declining market prices for certain metal-related trading products and manufactured steel products. In QE31/3/2013, revenue and profit before tax increased q-o-q was mainly due to the strong market demand for certain metal-related trading products and steel manufactured products and the contribution from its two ongoing property development projects in Selayang.
Table 1: Engtex's last 8 quarterly results
Table 2: Engtex's segmental results for 1Q2013 cf. 1Q2012
A quick look at Engtex's past 33 quarterly performance shows a steady growth in top-line but a flattish bottom-line.
Chart 2: Engtex's last 33 quarterly results
Engtex (at RM1.12 yesterday) is now trading at a PE of 6 times (based on last 4 quarters' EPS of 18.7 sen). At this PE, Engtex is deemed inexpensive.
Based on undemanding valuation, Engtex can be a stock to consider for long-term investment. The product manufactured & sold by the group could enjoy increased demand due to the pick-up in economic activities (in particular, the increased activities in the O&G & water sectors). The downside is that the share price has rallied sharply in the past two months and its immediate upside is capped by a strong resistance. You may want to wait for a pullback before getting into this stock.
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, Engtex.