Multi-Code Electronics Industries (M) Bhd ['Multico'] is involved in the manufacturing of electronics parts and accessories for the automotive industries. The factory is located at the Pandan Industrial Area, Johor Bahru, with approximately 500 employees.
Recent Financial Results
Multico has recently announced its results for QE31/7/2010, where its net profit increased by 39% q-o-q from RM2.5 million to RM3.5 million on the back of a 14%-increase in turnover from RM26.6 million to RM30.3 million. The improved performance is attributable to increased demand for motor vehicles.
Table: Multico's last 8 quarterly results
Chart 1: Multico's 13 quarterly results
Other Information
The huge losses incurred in QE31/7/2007 was due to provision for doubtful debts. Recently, 2 former directors of Multico were found guilty of defrauding the company of RM18 million in 2007. For more, go here.
Financial Position
Multico's financial position is very healthy, with strong liquidity & very little bank borrowings. As at 31/7/2010, its current ratio stood at 2.13 times & gearing ratio at 0.01 time.
Valuation
Multico (closed at RM0.745 yesterday) is now trading at a PE of 3.5 times (based on last 4 quarters' EPS of 21 sen). Being a smallcap stock, Multico could potentially command a PE of 6 times- giving it a potential target price of RM1.26.
Technical Outlook
After a long bottoming phase, Multico signaled its return by breaking above its strong horizontal resistance at RM0.60 in April. However, the stock did not go very far. After making a high of RM0.68, the stock dropped back. In late September, Multico surpassed the April high of RM0.68. This looks like a Cup-with-handle formation with the breakout at RM0.68. If this reading is correct, the stock could continue to rise & test the next horizontal resistance at RM1.00.
Chart 2: Multico's weekly chart as at Oct 5, 2010 (Source: Quickcharts)
Conclusion
Based on strong financial performance & position, undemanding valuation & positive technical outlook, Multico couls be a good stock for medium-term investment.
6 comments:
Hi Alex , pls advice for Sunway ! Cheers ......
hi Alex , The Sunway - Tradesignum chart for the Bollinger Band is going to downtrench ! next movement !!!!!!!
Hi KSLOO
When a stock comes up to the dollar mark or 50-cent mark, one can expect some resistance. Such is the case with Sunway when it hit the RM2.00 mark.
Now, the worried investors who did not sell at RM2.00 mark is having sweaty palms and wondering whether they should sell now or hold onto the stock. On the other hand, if you have sold at RM1.98 or RM1.99 or even RM2.00 a few days ago, you would also be sweating now because the stock did not drop back sharply! Why? Is it about to re-test the RM2.00 mark & what if it can break above it? To take the fear & greed out the equation, one should sit back & imagine that you are in the other person's shoe.
From the chart, I believe that Sunway may consolidate for a while, possibly drop to RM1.90-1.95. Then, if the market permits, it may re-test the RM2.00 again. Hopefully, you would be rewarded for your faith in this stock.
Good luck.
hi alex,
notice your write-ups on small cap. what do you think about PIE? PIE is also a fundamentally strong company, with huge cash. Besides that, also small number of shares and I notice it hasn't given out any bonus yet.
thanks
maxwealth88
Hi MaxWealth88
Despite rising turnvoer, PIE's profit has been sliding. This is probably due to weakening USD. Its EPS for 1H2010 is about 17 sen. This means the stock is trading at a PE of 12 times. For a medium size company, this multiple is deemed quite rich. Thus, its upside is limited.
Chartwise, PIE is caught in a cross wire. It is in an uptrend line that started in November 2008 (support at RM4.00). However, its upside is capped by a downtrend line that started in January 2008 (resistance at RM4.30).
I had invested in MULTICO one year ago.Until now i still a little by a little to accumulate this stock.
You are right, it should over 1.00 in future.
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