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Monday, June 02, 2014

Dsonic: Bottom-line dropped sharply

Results Update

For QE31/3/2014, Dsonic's net profit declined by 46% q-o-q or 17% y-o-y to RM12.5 million while revenue dropped by 29 %q-o-q or 13% y-o-y to RM52 million. The decline was attributed to lower revenue from the supply of data pages, personalization solutions & site preparation for personalization centres. In addition, the company also experienced a drop in the sales of consumables.


Table: Dsonic's last 8 quarter's result


Chart 1: Dsonic's last 8 quarter's result

As noted in my previous post, Dsonic's bottom-line dipped slightly in QE31/12/2013. Any further slide in the financial performance would be a matter of serious concern since the share price has risen multiple folds in the past 1 year.

Another Bonus Issue coming...

Dsonic's proposed 1-for-1 bonus issue will go ex on June 6. Since listing in September 2012, the stock has underwent a 1-for-2 bonus issue & a 1-to-5 share split.

Valuation

DSonic (closed at RM3.75 on Friday) is now trading at a PE of 28 times (based on last 4 quarterly EPS of 13.3 sen). At that PE multiple, the future earning must be very compelling to draw in more investors. The drop in earning could be a wake-up call to these investors.

Technical Outlook

DSonic broke its uptrend line, SS in April. The price direction for the next 1 week will be anybody's guess. Will it go up ahead of the bonus issue's entitlement date of June 6? Would it succumb to profit-taking due to poor set of result? Ideally, you should take profit under 2 scenarios:
1. The unlikely scenario of Dsonic climbing back to RM4.80-5.00 to reclaim its uptrend line
2. The possible scenario of Dsonic breaking above its horizontal resistance at RM3.90-4.00.


Chart: Dsonic's daily chart as at May 30, 2014 (Source: Tradesignum)

Conclusion

Based on the drop in financial performance, demanding valuation & mildly bearish technical outlook, Dsonic is rated a TRADING SELL. However, it is possible that the stock may surprise us with a late surge as the entitlement sate for the 1-for-1 bonus issue approaches. If that happens, you would get even prices for the stock and has a better reason to push out your stock.

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.

5 comments:

Jim said...

Hi Alex,

Can you comment on BRIGHT?

Thanks in advance.

lai said...

Hi Alex,

Given the interest hiking possibility, what is your view on REITs stocks?

Thanks a lot. You are doing fine.

Alex Lu said...

Hi Jim

BRIGHT is a highly speculative stock. Its earning is not bad at about 15 sen/share. At 65 sen, it is trading at a PE of 4.3x.

Its financial position is fairly good. Current ratio at 11x. No borrowings. Cash of 24 sen/share.

However, the share price behaves like a spoiled brat. It swings up and down like a yo-yo.

It has broken its long-term uptrend line at RM0.70 in January. A recent rebound failed to bring the stock back up to the uptrend line. It will try to hang onto the horizontal line support at RM0.60. A breakdown of that support may bring out more selling.

Given the decent financial position & performance, the technical picture is fairly disappointing.

Alex Lu said...

Hi Jim

BRIGHT is a highly speculative stock. Its earning is not bad at about 15 sen/share. At 65 sen, it is trading at a PE of 4.3x.

Its financial position is fairly good. Current ratio at 11x. No borrowings. Cash of 24 sen/share.

However, the share price behaves like a spoiled brat. It swings up and down like a yo-yo.

It has broken its long-term uptrend line at RM0.70 in January. A recent rebound failed to bring the stock back up to the uptrend line. It will try to hang onto the horizontal line support at RM0.60. A breakdown of that support may bring out more selling.

Given the decent financial position & performance, the technical picture is fairly disappointing.

Alex Lu said...

Hi lai

REITs will be negatively impacted in an environment of rising interest rate and property glut. Both scenarios are likely to surface in the next one year. Thus the upside for REITs may be limited.