WTHorse- broke its long-term uptrend line

Results Update

WTHorse has just announced its results for QE30/6/2011. Its net profit increased by 9% q-o-q to RM14 million on the back of a 18%-increase in its turnover to RM140 million. The sharply higher sales was attributed to festive season in 1Q2011. When compared to the same quarter last year, WTHorse' net profit declined by 18% while its turnover was unchanged.


Table: WTHorse's last 8 quarterly results



Chart 1: WTHorse's last 24 quarterly results

From Chart 2 below, we can see that WTHorse's net profit margin failed to rebound, after a drop which coincided with the festive season, for the first time in the past 5 years. This may be nothing or it may be a sign that things are going to get worse from hereon. We must track this stock closely.


Chart 2: WTHorse's profit margin for the last 24 quarterly results

Financial Position

As at 30/6/2011, WTHorse's financial position is deemed satisfactory, with current ratio at 2.3 times and debts to equity ratio at only 0.1 time.

Valuation

WTHorse (closed at RM1.75 last Friday) is now trading at a PE of 6 times (based on last 4 quarters' EPS of 28.93 sen). Based on current market condition, WTHorse is deemed fairly valued.

Technical Outlook

WTHorse broke its uptrend line (using the 10-month SMA line) at RM1.92. All indicators have turned down, which would signal the start of a bear phase for the stock.


Chart 3: WTHorse's monthly chart as at August 1, 2011_plotted on log scale (Source: Tradesignum)

Conclusion

The fundamental of WTHorse remained relatively unchanged. It has satisfactory financial performance & position. However the technical outlook has changed & given the current market condition, I would rate WTHorse a SELL or REDUCE.