Monday, May 03, 2010

Time to take profit (Part 1)

These days, I find it very hard to suggest any stock ideas because so many stocks have gone up so much. What's disconcerting & a bit shocking is that some of my readers & clients are asking about my old stock ideas which had risen spectacularly. I would list down some of them but I am sure some of you may say "No, ABC has a low forward PER of xx times based on EPS of xx sen, which would increase by xx% going forward." Some stocks may have other story lines, like an anticipated privatization or an impending business spin-off. For the latter category of stocks, you have to ask the tough questions like how likely is the privatization going through (and at what price) and for business spin-off, what would happen to the sale proceed (or, what new business would be acquired with this proceed). For the former category, you must ask questions like is the earning sustainable (or, is it cyclical). And, for both categories, you just consider how much of this story has been factored into the price.

The first two charts (KKB & Daiboci) show the stocks have risen to match the high recorded in 1996- the high recorded just before the Asian Financial Crisis. Check out my earlier post on KKB (here). I did not post on Daiboci, except to call a SELL on the stock (here).

KKB

KKB (closed at RM5.93 yesterday) is now trading at a trailing PER of 13 times (based on EPS of 45 sen for FY2009). It has benefited from sharply higher top-line & bottom-line in the past two quarters. Can KKB maintain these performance going forward? See Table 1 below.


Table 1: KKB's last 8 quarterly results


Chart 1: KKB's monthly chart as at April 30, 2010 (Source: Tradesignum)

Daiboci

Daiboci (closed at RM3.21 yesterday) grew its turnover by 9% q-o-q in QE31/3/2010 but suffered a 17%-drop in net profit. It trades at a trailing PER of 11 times (based on last 4 quarters' EPS of 30 sen). Why did Daiboci fail to grow its top-line for so long, until the last quarter (QE31/3/2010)? Even the higher turnover for QE31/3/2010 was accompanied by a lower net profit.


Table 2: Daiboci's last 8 quarterly results


Chart 2: Daiboci's monthly chart as at April 30, 2010 (Source: Tradesignum)

Conclusion

Based on the extremely sharp price run-up for these two stocks, I think it is best to take profit now.
at

2 comments:

  1. AvatarTuesday, May 04, 2010 1:14:00 PM

    Hi Alex,

    Thanks for your Tttp (Part 1). Would also appreciate your insight on Hunza Properties.

    Cheers.

    ReplyDelete
  2. Alex LuTuesday, May 04, 2010 4:52:00 PM

    Hi Avatar,

    I have not looked at Hunza Properties for a while. I remember it as a profitable company. For the 9-mth ended 31/3/2010, it reported a net profit of RM37 mil on turnover of RM175 million. Annualized basic EPS for FY2010 is about 33 sen. At yesterday's closing price of RM1.22, Hunzpty is trading at a PER of 3.8 times. Its financial position is satisfactory with current ratio at 2.7 times and a gearing ratio of 0.24 times.

    Despite the above, the share price shows a surprising pathetic performance. The stock rose from its base of RM1.05 in Jan- Apr last year to a high of RM1.60 in Jan this year. The share has now retreated to the strong horizontal support of RM1.20. I think the stock is likely to hang around the RM1.20 level for a while.

    It is an attractive stock which may take a while to show its shine.

    ReplyDelete