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Thursday, February 20, 2014

JCY- brighter prospect ahead


Recent Financial Result

IN QE31/12/2013, JCY reported net profit of RM30 million vs. a net loss of RM2.3million in QE30/9/2013 or RM25.7 million last year. Revenue rose by 15% q-o-q or 27% y-o-y to RM477 million. The company attributed the q-o-q increase in revenue to the higher quantities shipped and better ASP. JCY returned to profitability due to continuing efforts on improving its operational efficiency and the better revenue.

JCY expects demand for HDDs to remain stable, as the increased demand for cloud infrastructure, game consoles and other enterprise applications compensates for the decline in PC shipments. The consolidation of the HDD industry could lead to more favourable margins for HDD manufacturers. The combination of these and other factors will likely reduce downward pressures on ASP for mechanical HDD components.


Table 1: JCY's last 8 quarterly results

From Chart 1 below, we can see that top-line, bottom-line & profit margin are all rising. More importantly, the 4-Q PBT & NP margins are both positive. All these positives were present in 2011 when JCY had a sharp rally from RM0.40 to RM1.60. The same may happen today.

Chart 2: JCY's last 21 quarterly results 

Technical Outlook

JCY is poised to enter into its next upleg. The share price has just breached the line connecting the reaction highs (B-B1) at RM0.72-0.73. Its immediate resistance will be the horizontal line at RM0.90 and beyond that, we have resistance at RM1.00 (psychological level), RM1.05 & RM1.40.



Chart 1: JCY's weekly chart as at Feb 19, 2014 (Source: Tradesignum) 

Valuation

JCY (closed at RM0.755 yesterday) is now trading at a PE of 13 times (if we assumed that JCY can repeat its last quarter performance, with annualized EPS of 5.8 sen). At that PE, JCY is deemed fairly valued.
 
Conclusion

Based on improved financial performance, improving industrial outlook & mildly bullish technical outlook, JCY could be a good stock for a trading BUY.

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, JCY.


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