Huayang- short-term setback?

Results Update

For QE30/6/2013, Huayang's net profit dropped by 28% q-o-q or 25% y-o-y to RM12 million while revenue also declined by 21% q-o-q or 18% y-o-y to RM80 million. The poorer performance was due to slower construction progress and minimal launches recognition from preceeding quarter and current quarter.


Table: Huayang's last 8 quarterly results


Chart 1: Huayang's last 29 quarterly results

Valuation

Huayang (at RM3.17 yesterday) is trading at a PE of 8.8 times (based on last 4 quarters' EPS of 36 sen). At this PE, Huayang is still deemed attractive but its upside is limited. It may trade up to a PE of 10 times; thus giving an upside of 14% (to RM3.60). 

Proposed Bonus Issue

Huayang has just proposed a 1-for-3 bonus issue. The last time, it proposed a bonus issue (also a 1-for-3 bonus), was in middle of 2011 (completed in October). 

Technical Outlook

Huayang's uptrend accelerated after it broke above the horizontal line at RM1.70. See Chart 2. Thestock rallied to a high of RM3.33-3.34. Profit-taking set in and the stock traded in a short-term downward channel (ABCD). See Chart 3. Huayang's uptrend will continue if it can break above the recent high at RM3.33-3.34.


Chart 2: Huayang's weekly chart as at July 17, 2013(Source: quickcharts)


Chart 3: Huayang's daily chart as at July 17, 2013(Source: quickcharts)
 
Conclusion

Based on good financial performance & still attractive valuation, Huayang is a good stock for long-term investment. However, I expect short-term profit-taking activities to cap its upside at RM3.33-3.34 notwithstanding an attractive bonus issue to come.

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, Huayang.