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Wednesday, November 11, 2015

JCY: Better earnings needed!

On November 5, I posted on JCY having a bullish breakout above its RM0.80 horizontal line. Is this breakout supported by existing financial performance?

Recent Financial Results

The latest quarterly results for JCY is for QE30/6/2015. The next quarterly results for QE30/9/2015 will only be out at the end of November.

In QE30/6/2015, JCY's net profit dropped 36% q-o-q to RM32.6 million on the back of a 6%-decline in revenue to RM480 million. Compared to the same quarter last year, net profit is up 30% while revenue is up 6%. Revenue dropped q-o-q due mainly to lower volume shipped and lower selling prices, albeit the strengthening of USD vis-à-vis MYR. Bottom-line dropped q-o-q due mainly to lower revenue and the weakening of THB vis-a-vis USD.


Table: JCY's last 8 quarterly results


Chart: JCY's last 27 quarterly results

Industry Outlook

According to an article in Kitguru, the prospect for the HDDs sector is a challenging. It opined that "(s)ales of hard disk drives have been on the decline this year because of slow demand for personal computers and tough competition from solid-state drives. While Seagate Technology and Western Digital Corp. hope that demand of HDDs will pick up in the coming quarters, a market analyst claims that it will decline again. Moreover, in the long-term, HDD makers will have to lower the price of their products because of competition." For more, go here.

Valuation

JCY (closed at RM0.88 on November 8) is now trading at a trailing PER of 11X (based on last 4 quarters' EPS of 7.9 sen). At this PER, JCY is deemed fully valued.

Technical Outlook

The breakout of the RM0.80 horizontal line can be clearly seen in both Chart 2 & 3. In Chart 3 (Weekly chart), we can see that JCY has also broken above the line, ab at RM0.85. Its immediate resistance is the horizontal line at RM0.90. Beyond that, the psychological resistance at RM1.00 should cap the rise until earnings improves. 


Chart 2: JCY's monthly chart as at Nov 8, 2015 (Source: ShareInvestor)

 
Chart 3: JCY's weekly chart as at Nov 8, 2015 (Source: ShareInvestor)

Conclusion

So far, the rally in JCY is technically driven. This upleg may gain momentum if the next quarterly results (expected in the last week of November) shows a sharp improvement in earnings.

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.

2 comments:

luckystock2 said...

Hi Alex ,
Can you comment briefly on MUH fundamental and technical outlook ?For me, it looks cheap but the technical is negative.
Thank you !

Alex Lu said...

Hi luckystock2

MUH did not fare too well after my call in June. The stock is still in a downward channel, with support & resistance at RM0.85 & RM1.20. Part of the reason for the drop is the poorer results in QE30/6/2015.

In that quarter, MUH registered a revenue RM7.144 million, representing a decrease of RM 8.816 million or 55.24% compared to the immediate preceding quarter of RM 15.959 million. Its profit before tax decreased to RM 1.620 million compared to profit before tax of RM5.805 million recorded in the immediate preceding quarter mainly due to lower revenue recorded from Property segment.

For its recovery to take place, its earning must improve. And, the share price must break above the RM1.20 mark.