Zhulian: Earning dropped again!

Result Update

For QE30/5/2014, Zhulian's net profit dropped by 52% q-o-q or 78% y-o-y to RM8.3 million while revenue also dropped by 1% q-o-q or 38% y-o-y to RM66 million. Net profit dropped q-o-q mainly due to drop in revenue and higher expenses incurred, offset by slight increase in share of profit of equity accounted investee. Revenue dropped q-o-q mainly due to decrease in local market demand, offset by higher demand from Thailand market.


Table: Zhulian's last 8 quarterly results

 
Chart 1: Zhulian's last 31 quarterly results 

Valuation

Zhulian (closed at RM2.69 today) is now trading a PE of 16 times (based on last 4 quarters' EPS of 17 sen). With quarterly EPS sliding afresh, forward earning is likely to be around 10 sen. At that earning level, the stock is now trading at a PE of 27 times.

Technical Outlook

Zhulian is now testing its long-term uptrend line at RM2.50. This is also a strong horizontal support for the stock. From here, the stock should find some support and hopefully form a base. However, if this support is taken out, then Zhulian can drop to RM2.00-2.20.


Chart 2: Zhulian's weekly chart as at July 17, 2014 (Source: Tradesignum)

Conclusion

Despite the poor financial performance & expensive valuation, Zhulian is still rated a HOLD for now. If it breaks the RM2.50 mark, then Zhulian is traded a TRADING SELL.

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, Zhulian.