AHealth- time to take profit

Results Update

AHealth has just announced its results for QE30/6/2011 where its net profit dropped 26% q-o-q to RM6.6 million on the back of a 4%-decline in turnover to RM89 million. The decline was attributed to the normalization of an exceptional strong 1Q2011. As compared to the same quarter last year, AHealth's net profit increased by 13% while turnover grew by 15%.


Table: AHealth's last 8 quarterly results



Chart 1: AHealth's last 13 quarterly results

Financial Position

As at 30/6/2011, AHealth's financial position is deemed satisfactory, with current ratio at 2.3 times and debts to equity ratio at a negligible 0.04 time.

Valuation

AHealth (closed at RM2.92 last Friday) is now trading at a PE of 9.4 times (based on last 4 quarters' EPS of 31 sen*). At this PE multiple, AHealth is deemed fairly valued under the present poor market sentiment.

(*Note: The last 4 quarters' EPS is about 38.3 sen. However, this includes 7 sen of exceptional gain in QE31/12/2010. To compute our PE multiple, we have to exclude this exceptional gain & adjust the EPS to 31 sen.)

Technical Outlook

AHealth's share price performance has been spectacular for the past 3 years. Its strong support is at the horizontal line RM2.80 which coincides with the 10-month SMA line at RM2.85. If that support is violated, the share may drop to the next horizontal support at RM2.60 & then at RM2.40.


Chart 2: AHealth's monthly chart as at August 1, 2011_plotted on log scale (Source: Tradesignum)

Conclusion

Based on good financial performance & financial position, AHealth is a good stock for long-term investment. However, due to the poor market sentiment, we should consider taking some profit in this investment.