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Wednesday, October 26, 2016

Gtronic: Bottom-line Maintained, Top-line Slid Further

Result Update

For QE30/9/2016, Gtronic's net profit increased by 40% q-o-q to RM9.2 million while revenue was dropped 9% q-o-q to RM52 million. Compared to the same quarter last year, net profit dropped 55% while revenue was down by 41%.

Revenue dropped q-o-q due to the continuous softer volume loadings from some of the Group's customers as a result of reduction in end customers' demand. Net profit rose q-o-q mainly due to cost control program carried out in the Group and forex gain (net) recognized (RM1.6 million) compared to forex gain of RM0.3 million in the preceding quarter and grant income of approximately RM1.4 million recognized as compared to preceding quarter of RM0.2 million


Table 1: Gtronic's last 8 quarterly results


Chart 1: Gtronic's last 38 quarterly results
  
Financial Position
 
Gtronic's financial position remained healthy with current ratio at 6.2x and gearing ratio at 0.2x. 
Valuation 

Gtronic (closed at RM3.56 yesterday) is now trading at a PE of 28 times (based on last 4 quarters' EPS of 12.46 sen). At that PER, Gtronic is deemed overvalued with no sign of a rebound in top-line.

Technical Outlook

Yesterday afternoon, we saw a sudden sharp selldown in Gtronic. It sent the share price plunging from RM3.90 to an intra-day low of RM3.40 before technical rebound pushed back the share price to close at RM3.57.


Chart 2: Gtronic's daily chart as at Oct 25, 2016 (Source: ShareInvestor.com)

The selldown capped a steady recovery in the share price made a low of RM2.75 on August 4. Gtronic failed to stay above the intermediate downtrend line at RM3.80. It may hover around RM3.40-3.80 until we can get clarity on the outlook for the business.


  Chart 3: Gtronic's weekly chart as at Oct 25, 2016 (Source: ShareInvestor.com)

Conclusion

Based on continued weak demand, high valuation & bearish technical outlook, I revised my rating for Gtronic to a SELL.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.
 

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