Cepat is poised to test its recent high of RM1.43

Background

Cepatwawasan Group Bhd (‘Cepat’) is involved in the cultivation of oil palm & palm oil milling. Cepat owns about 10,000 hectares of oil palm estates located in Sabah. The total acreage has increased by 1,295 hectares in May when it completed its acquisition of the entire equity stake in ASSB from its associate, MHC Plantation Bhd. ASSB owns a piece of plantation land measuring 1,954 hectares in Sabah which is partly planted with oil palm & partly leased out to a third party for fruit cultivation.

Financial Results

Due to the addition of the new estate in May & better prices for CPO, Cepat's topline & bottomline was given a healthy boost in the QE31/7/2007. Its net profit increased by 74% q-o-q or almost 3-fold to RM8.8 million, while turnover increased by 44% q-o-q or 74% y-o-y to RM47.1 million.



Valuation

If Cepat could maintain the same earning of 4.07 sen in QE31/7/2007 for the full year, its EPS would jump to 16.28 sen. Based on its closing price as at Sept 20 of RM1.10, Cepat would be trading at a PE of 6.7 times. That's very attractive for a plantation stock.

Technical Outlook

For the past 2 or 3 years, Cepat's share price has been trapped in a bottoming process known as the saucer bottom. A reversal is confirmed when the share price surpassed the reaction high that marked the beginning of the decline at the start of the pattern. In the case of Cepat, I believe that reaction high is RM1.15/16. In fact, this stock has surpassed that high before (in August), but the sharp rally could not sustain. Maybe, the next attempt would do the trick.


Chart: Cepat's weekly chart as at September 20 (courtesy of Quickcharts)

Conclusion

Based on good financial performance & very nice technical set-up, Cepat could be a good stock for a trade or for medium-term investment.