WTHorse- bottom-line slid further

Result Update

For QE30/9/2012, WTHorse's net profit declined by 16% q-o-q or 29% y-o-y to RM8.5 million while revenue dropped 6% q-o-q but rose 13% y-o-y to RM149 million. The company's profit margin continued to decline over the past two years due to higher production costs & higher operating costs. With continued slide in profit margin and weakness in the property market, I do not expect WTHorse's bottom-line to rebound soon.


Table: WTHorse's last 8 quarterly results


 Chart 1: WTHorse's last 27 quarterly results

Valuation

WTHorse (closed at RM1.65 yesterday) is trading at a PE of 7.7 times (based on last 4 quarters' EPS of 21.31 sen). While this multiple is fair, the continued decline in its bottom-line points the price direction of the stock, which is likely to be downward.

Technical Outlook

For the past 13 years, WTHorse has traded between RM1.10 & RM2.10. It has rotated between these two extremes- after touching the high, it would go down to the low or vice versa. If these two patterns persist, then we may see WTHorse visiting the low of RM1.10 over the next few years.


Chart 2: WTHorse's monthly chart as at Nov 21, 2012 (Source: Tradesignum)

Conclusion

Based on weaker financial performance and uncertain technical outlook, I would rate WTHorse as a REDUCE.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, WTHorse.