IJM has announced a poor set of results for QE31/3/2011. Despite a 21%-increase in turnover, its pre-tax profit dropped 54% y-o-y due to the provision made against contractual claims, recovery of receivables and project losses, and lower FFB production and sales volume as a result of shift in cropping pattern. IJM incurred a net loss of RM20 million due to higher effective tax rate which was attributable mainly to current year deferred tax asset not recognized and expenses not deductible for tax purposes. For more, go here or here.
Technical Outlook
The drop in the bottom-line may cause some near-term weakness in IJM share price. IJM may test its uptrend line support at RM6.00-6.05. A break of this uptrend line could be quite bearish. Its next support would be the horizontal line at RM5.70-5.80. In addition, we can see that IJM is looking toppish after a long rally (see Chart 2). The monthly indicators have eased off or hooked down but we have yet to see the negative cross-under in the MACD indicator.
Chart 1: IJM's weekly chart as at May 27, 2011 (Source: Quickchart)
Chart 2: IJM's monthly chart as at May 27, 2011_plotted on log scale (Source: Tradesignum)
Conclusion
Based on poorer financial performance, we can expect some near-term weakness in IJM share price. If the share price were to drop below the RM6.00 level, the technical outlook would turn bearish.
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