RSawit may have a bullish breakout

RSawit has just broken above its downtrend line at RM1.08. The last 2 time it did a breakout, it rallied quite significant. We may expect the same from this stock, possibly testing its recent high at RM1.19-1.20. If it can break above that level, it may go to a high of RM1.35-1.40.


Chart: RSawit's daily chart as at July 5, 2012 (Source: July 5, 2012)

I first posted on this stock in 2010 (here) when its outstanding shares was only 130 million. Since its massive Right Issue & Bonus Issue last year, its outstanding shares have ballooned to 1.3 billion. An investor who bought in 2010 would have seen his capital increased by 200%!

RSawit's net profit was RM66 million in FYE31/12/2012 as compared to RM41 million in the previous year. This means that RSawit achieved an EPS of 5 sen. At RM1.10, RSawit is now trading at a trailing PE of 22 times! For QE31/3/2012, it achieved a net profit of RM4.8 million- a drop from RM15.7 million previously. Based on this, RSawit is deemed fully valued.

Based on the above, I would rate RSawit a possible trading BUY. However, the stock is deemed fully valued and this may cap its upside potential.