Tuesday, July 09, 2013

Engtex- a stock to watch

Technical Outlook

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

A closer look at the quarterly result by segments show that Engtex's increased revenue came from wholesale & manufacturing segments while increased operating results came from manufacturing & property development segments. The manufacturing segment is involved in the manufacturing of steel pipes, valves & fittings and other steel related products while the wholesale segment is a one-stop solution centre for pipe, valve, fittings, building & construction materials and steel products.

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.

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