Petdag- sell into strength

Results Update

Petdag's net profit dropped by 3.3% q-o-q to RM228 million despite a 7.6%-increase in turnover to RM6.382 billion. The decline was attributable to higher operating expenditures. However, net profit increased by 41.8% y-o-y on the back of a 17.8%-increase in turnover.


Table: Petdag's last 8 quarterly results



Chart 1: Petdag's past 12 quarterly results

Valuation

Petdag (closed at RM15.60 at noon) is now trading at a PE of 17.8 times (based on last 4 quarters' EPS of 87.6 sen). At this multiple, Petdag is almost fully valued.

Technical Outlook

Petdag is in a long-term uptrend line, with support at RM9.00. The possible resistance posed by the parallel line (to the long-term uptrend line) is at RM18.00. The RSI has hooked down, which may be signally weakness ahead.


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

Conclusion

As Petdag is trading near its fair value & may encounter possible resistance as it approach the RM18.00 level, we should consider selling into strength if & when it exceeds the RM16.00 mark.