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Wednesday, February 22, 2017

Emetall: Not Such An Excting Stock After All

Result Update

In QE31/12/2016, EMETALL reported a net loss of RM3.2 million on a 70%-increase in revenue of RM29 million. The loss was incurred mainly due to increase in production cost of steel product and trading activity segment.


Table: EMETALL's last 8 quarters' P&L  

The last 2 quarters of poor earnings raised serious doubt as to the earlier assumption made about this stock.


Graph: EMETALL's last 12 quarters' P&L  

Valuation

EMETALL (closed at RM0.64 yesterday) is now trading at a trailing PER of 8.6x (based on last 4 quarters' EPS of 7.39 sen). With 2 quarters of poor results, EMETALL - a small-cap stock - does not deserve a PER of 8x or better. Thus this stock is deemed fully or over-valued.

Technical Outlook

EMETALL is now hanging onto its intermediate uptrend line, with support at RM0.63. If this uptrend line is violated, it may drop to the support from the horizontal lines at RM0.50 or RM0.40.


Chart 1: EMETALL's weekly chart as at Feb 21, 2017 (Source: Shareinvestor.com)


Chart 2: EMETALL's monthly chart as at Feb 21, 2017 (Source: Shareinvestor.com)

Conclusion

Based on ipoor financial performance and demanding valuation, I downgrade my rating for EMETALL 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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