CCM- a nascent recovery play?

Results Update

For QE31/12/2012, CCM's net profit increased by 120% q-o-q or 91% y-o-y to RM18 million while revenue was mixed - rose 1% q-o-q but dropped 6% y-o-y - to RM378 million. Revenue dropped q-o-q due to lower revenue contribution from the Chemicals and Fertilizers Divisions. Bottom-line improved due to due to improvement in gross profit margins across the Divisions; operational cost reduction in Chemicals and Fertilizers Divisions; and recognition of change in fair value of investment properties of RM7.4 million.

The management continues to remain cautious and expect the challenging operating environment ahead.



Table: CCM's last 8 quarterly results


Chart 1: CCM's last 28 quarterly results

Valuation

CCM (closed at RM1.02 today) is now trading at a PE of 11.5 times (based on last 4 quarters' EPS of 8.9 sen). At this PE multiple, CCM is deemed fairly valued.

Technical Outlook

CCM's long years in the wilderness was noted in my previous post entitled CCM- a 6-year decline!. From the chart below, we can see that irregular downward channel (Rx-Rx, Sx-Sx) which guided the share price lower. In its deeply oversold position, the stock could stage a rebound that could recoup some of its lost ground. It is too hopeful to expect the share price to rise up to Rx-Rx but a recovery to R1-R1 is not too far-fetch.


Chart 2: CCM's weekly chart as at Mar 4, 2013 (Source: Tradesignum)

Conclusion

Based on challenging operating environment & unexciting financial performance, the only argument to but CCM is that it is deeply oversold.

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, CCM.