For QE31/12/2010, TChong's net profit increased by5.5% q-o-q or 21.9% y-o-y to RM52 million while its turnover dropped 4.1% q-o-q but increased by 16.0% y-o-y to RM835 million. From Chart 1 below, we can see that TChong's top-line & bottom-line have slid in the past 2 quarters. Is this an aberration or has the growth in the auto sector hit the wall?
Table: TChong's last 8 quarterly results
Chart 1: TChong's last 17 quarterly results
Valuation
TChong (closed at RM4.90 yesterday) is now trading at a PE of 14 times (based on last 4 quarters' EPS of 35 sen). At this PE multiple, TChong is deemed overvalued. I believe a fair PE multiple for auto stocks is about 8-12 times, depending on growth potential.
Technical Outlook
TChong broke its accelerated uptrend line at RM5.45-5.50 in October 2010. On Tuesday, it broke below its horizontal line at RM5.00. TChong may test its uptrend line that started in July 2009 where the support si at RM4.60-4.70. Check out my technical call to take profit on TChong issued in December (here).
Chart 2: TChong's weekly chart as at Feb 25, 2011 (Source: Quickcharts)
Conclusion
Based on unattractive valuation & bearish technical outlook, we should avoid TChong.
No comments:
Post a Comment