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Tuesday, March 15, 2016

SCGM: Earnings Continued To Grow

Results Update

In QE31/1/2016, SCGM's net profit rose 47% q-o-q or 83% y-o-y to RM7.1 million while revenue rose 9% q-o-q or 36% y-o-y to RM37 million. Revenue increased q-o-q due to increased sales demand from both local and export customers. Bottom-line dropped q-o-q due to 9% drop in the raw material prices.

 
Table: SCGM's last 8 quarterly results

 
Chart 1: SCGM's last 28 quarterly results

Valuation

SCGM (closed at RM3.07 yesterday) is now trading at a PE of 17X (based on last 4 quarters' EPS of 17.85 sen). With earning CAGR of 40% (for the past 2 years), SCGM's PEG ratio is at a decent 0.4X. As a growth stock, SCGM is deemed fairly attractive.

Technical Outlook

SCGM is in a uptrend line support at RM2.50. There are signs of weakness in the weekly chart: MACD has crossed below the MACD signal line and the -DMI has crossed above the +DMI at the same time the ADX is trending lower. These indicate that the share price is likely to pullback to the uptrend line. This may reflect concern for the stock due to the strengthening of the MYR.


Chart 2: SCGM's monthly chart as at Oct 26, 2015 (Source: Tradesignum.com)

Monthly chart shows the sharp rise in SCGM share price in the past 2-3 years. However, the long-term uptrend line is still in tact.


Chart 2: SCGM's monthly chart as at Oct 26, 2015 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance, reasonable valuation & positive technical outlook (albeit signs of weakness noted), SCGM is still a good stock for long-term investment. SCGM is rated a HOLD for now and a possible TRADING BUY at RM2.50.

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, SCGM.

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