FIMACOR's top-line & bottom-line dropped q-o-q

Results Update

Fimacor's net profit dropped by 28% q-o-q to RM16.6 million on the back of a 9%-decline in turnover to RM68.5 million. However, net profit increased by 33% y-o-y despite a 17%-decline in turnover. From Chart 1 below, it looks like Fimacor's top-line has peaked 3-4 quarters ago while its bottom-line may be peaking now. We need to watch the next quarter's results to see whether a new trend has set in. If the bottom-line has peaked, the price of the stock would under-perform.


Table: Fimacor's last 8 quarterly results



Chart 1: Fimacor's past 14 quarterly results

Valuation

Fimacor (closed at RM6.40 yesterday) is now trading at a PE of 6.5 times (based on last 4 qaurters' EPS of 99 sen). At this multiple, Fimacor is deemed attractive.

Technical Outlook

Fimacor's uptrend has picked up pace over the past 2 years. We can see that its uptrend from 1998 to 2009 was within the pink upward channel. After it broke above the pink parallel line in early 2010, the share price rallied further. The current uptrend is better captured by the blue upward channel. In late 2010, Fimacor again broke above the blue parallel line as well as the all-time high of RM5.40. Recently, it hit a new all-time high of RM6.50.

Fimacor's immediate support is at the 10-month SMA line at RM5.77 which coincides with the blue parallel line. Its immediate resistance is the recent all-time high of RM6.50.


Chart 2: Fimacor's monthly chart as at May 24, 2011_plotted on log scale (Source: Tradesignum)

Conclusion

Based on attractive valuation & bullish technical outlook, I would rate Fimacor a HOLD. However, we need to track the financial performance of the company closely.