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Sunday, June 04, 2017

Ulicorp: Earnings Remained Weak

Result Update

For QE31/3/2017, Ulicorp's net profit dropped 38% q-o-q or 50% y-o-y to RM3 million while revenue was mixed - down 7% q-o-q but up 4% y-o-y to RM46 million. Revenue dropped q-o-q for both the Cable Support Sytems & Electrical Lighting & Fittings segments. Profit before taxation dropped q-o-q mainly due to lower revenue generated, lower interest income arising from placement of fixed deposits, higher administration costs, higher repair and maintenance of plant and machinery, higher depreciation/amortization costs and lower profit margin achieved on goods sold during the quarter under review. (The latest quarterly result was announced on May 25.)


Table: Ulicorp's last 10 quarterly results


Graph: Ulicorp's last 15 quarterly results

Valuation

Ulicorp (closed at RM4.50 last Friday) is now trading at a trailing PER of 23x (based on last 4 quarters' EPS of 19.23 sen). At this PER, Ulicorp is deemed overvalued for a stock that's no longer a growth stock.

Technical Outlook 

Ulicorp suffered a sharp selldown in August 2015. The stock dropped form RM6.50 to its horizontal support of RM3.50. Its immediate support comes from the horizontal line at RM4.50 while the immediate resistance comes from the horizontal line at RM5.00.


Chart: Ulicorp's weekly chart as at Jun 2, 2017 (Source: Shareinvestor.com)

Conclusion

Based on weak financial performance and high valuation , I revised my rating for Ulicorp from a HOLD to SELL INTO STRENGTH.

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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