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Monday, February 27, 2017

Kawan: Earnings Dropped Sequentially

Results Update

For QE31/12/2016, Kawan's net profit dropped 41% q-o-q to RM7.2 million while revenue dropped 10% q-o-q to RM42.6 million. Compared to the same quarter last year, net profit rose 4% on the back of a 4%-rise in revenue. Revenue dropped q-o-q due to lower export to the North American market. Profits dropped q-o-q mainly due to lower advertisement and promotion expenses in the preceding quarter.


Table: Kawan's 8 quarterly results


Graph: Kawan's P&L  for last 15 quarterly results

Valuation

Kawan (closed at RM4.41 last Friday) is now trading at a trailing PER of 32x (based on last 4 quarters' EPS of 13.94 sen). The high PER reflects the high expectation of a jump in earning in the current year due to the increased capacity from the new factory. See my earlier post on this stock (here).

Technical Outlook

On Feb 15, Kawan broke above the horizontal line at RM4.00 and gradually rose to RM4.41. Can it continue its uptrend after the latest uninspiring result? We will have to wait and see.


Chart: Kawan's weekly chart as at Feb 24, 2017 (Source:ShareInvestor.com)

Conclusion

Based on positive technical breakout, Kawan could be a good stock for trading BUY. It may even be a good long-term investment if the results for the next 2-3 quarters confirm the uptake for its huge expansion.

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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