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Friday, March 14, 2014

Dsonic: The gift that keeps giving!

Everyone loves to own a winner in the stock market. Better still if you can get a multibagger. And, there is no bigger big mutibagger in the past one year than Dsonic.

Dsonic was listed in September 2012 at its IPO price of RM2.00. In May 2013, it broke above the RM2.00 resistance and launched into a rally that saw its share price rose 13-fold!! If you have the good fortune to buy 2000 Dsonic shares at the point of breakout at RM2.00, you would now have 15,000 Dsonic shares trading at RM3.62. The increase in units was not due to any Rights Issue but purely due to a 1-for-2 bonus issue and a 1-to-5 share split.  This means that your initial outlay of RM4000 is now worth RM54300.

Imagine my surprise when I recently learned that Dsonic is again proposing another bonus issue! Mind you, this is a 1-for-1 bonus issue! Like Mae West, Dsonic subscribes to the idea that "Too much of a good thing is wonderful."

I have seen quite a few spectacular rises in the past but Dsonic must take the cake. Never have I seen a stock so determined to reward its shareholders like Dsonic. This stock will be long remembered as a stock that keep on giving....

I appended below the quarterly results (in table & chart) and the price chart for your perusal. You will note that the earning dipped slightly last quarter. That's not a significant development unless this trend persists for next 1-2 quarter(s). The EPS is about 12 sen (arrived at by dividing its NP of RM82 million by the total shares issued of 675 million units). At the current price of RM3.62, it is trading at a trailing PE of 30 times.


Table: Dsonic's last 7 quarterly results


Chart 1: Dsonic's last 7 quarterly results


Chart 2: Dsonic's daily chart as at Mar 13, 2014 (Source: Tradesignum)

I touched on Dsonic a few months back (here), lamenting about missing out on the stock. Others have done a better job at selling this stock. For example,  RHB Research called a BUY on it with TP of RM3.36 (here) while Maybank IB highlighted it as a trading idea (here, go to Page 5). RHB's TP of RM3.36 is based on PE of 23.5x FY2014F and even that bullish target has been overrun.

In times like this, I remind my clients to be careful. Whenever we blow a balloon too fast, we run the risk that the balloon will blow up in our face.

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, Dsonic.

6 comments:

lai said...

Hi Alex,

Can i have your outlook on Hil industry?

Thanks.

charles leong said...

Hi alex-i am amused at the way you commented on datasonic.lets wait for the music to stop on this musical chair !! How come no UMA from bursa?Humm.datasonic is one of our client !!

Alex Lu said...

Hi lai

Hil industry? To my surprise, I have posted on this stock in January!!

HIL has the kind of breakout of a long-term downtrend line that is always good to get involved in. You see that in PICorp and Lonbisc.

The immediate resistance level is at RM0.65. Beyond that, you have RM0.75 & RM0.80.

Alex Lu said...

Hi charles leong

I don't think you can issue UMA for the rally in Dsonic. The company has good results and there were the bonus issue and share split, which are supportive of a rally in the stock. Even now, Bursa can't do much since any query will elicit the usual reply or maybe they will point a finger to the upcoming bonus issue.

Just imagine, you have bought 2000 shares in May 2013, you could be owning 30,000 after the completion of the next bonus issue.

This is a stock on steroid! And we all know what steroid can do to you...

Kwang Hui Chan said...

Still good time to buy?

elizabeth said...

I was a skeptic on Dsonic so I missed out the rally. However, a closer look at the numbers tell you that the company is making a killing of its customers, posting a 35% to 40% PBT margin. Unless their customers are the government who have different criteria, the good run will soon be curtailed when customers start to renegotiate for a fairer deal. The way the company go about giving bonus, etc, show the owners' intention to let the stock price run. Granted that the market for the business will grow, but, can the margins be sustained? At price to book of 17x, simply magical!!