MPI has just announced its results for QE30/9/2011. The loss was attributed to lower revenue recorded across all business segment of the company. The management expects the business prospect to be challenging due to softening demand & uncertain macro-economic outlook.
Table: MPI's last 8 quarterly results
Chart 1: MPI's last 19 quarterly results
Semiconductor Sector Outlook
The chart for Philadelphia Semicon Index (SOX) confirmed the challenging outlook for semiconductor sector. However, you can see that SOX has risen to its medium-term downtrend line. A break above that downtrend line could signal a recovery in this sector.
Chart 2: SOX's daily chart as at Nov 8, 2011 (Source: Stockcharts)
Valuation
MPI (closed at RM3.21 yesterday) is now trading at a PE of 27 times (based on last 4 quarters' EPS of 12 sen). At this multiple, MPI is deemed overvalued. However, the company operates in a cyclical business and in a cyclical low, Price to earning method of valuation is not appropriate. The better method is Price to Book and based on this method, MPI is deemed fairly valued at a PB of 0.8 time (based on Book Value of RM3.89 as at 30/9/2011).
Technical Outlook
MPI is in a downward channel, with support at RM2.40. However, if you draw a "horizontal line" connecting its low in April 2009 & its recent October low, that line could act as a support at RM2.90.
Chart 3: MPI's weekly chart as at Nov 8, 2011 9source: Quickcharts)
Conclusion
Based on the above, MPI should be avoided for now. Those with a long investment time horizon may choose to do otherwise. If you are one of them, I think you can nibble slowly into the stock. Buying any stock at the cyclical low can be rewarding but it requires a lot of patience.
I was reading an article which appeared on Taikurs and Taikons under its private eye column, commenting that MBMR is entering into a possible loan agreement with Xingquan whereby a loan of RM50 million will be disbursed to Xingquan in exchange for its preferential shares. Apart from this, Xingquan is to commit 35% of its future profits to be declared as dividends.
ReplyDeleteWhat do you think?
Hi gwynwelsh
ReplyDeleteThe two items on MBMR's investing in Xingquan's pref shares (if true) & the dividend payout policy are positive for the stock.
However, the stock is still in a downtrend line with resistance at RM0.95-1.00. Its horizontal support is at RM0.85.
Please check on the financial statements for the fundamental aspects of the stock.