SCGM- time to take some profit

Result Update

For QE30/4/2013, SCGM's net profit increased 33% q-o-q or 29% y-o-y to RM1.8 million while revenue dropped 13% q-o-q but rose 3% y-o-y to RM23 million. Bottom-line increased q-o-q due to higher margin which resulted from product sale price increase coupled with the consistent production efficiency & stable input cost, such as labor cost and raw materials cost (which was brought about by decline in commodities prices).


Table: SCGM's last 8 quarterly results


Chart 1: SCGM's last 17 quarterly results

Valuation

SCGM (closed at RM1.10 last Friday) is now trading at a PE of 11.5 times (based on last 4 quarters' EPS of 9.6 sen). For a small-cap stock, SCGM is deemed full valued.

Technical Outlook

SCGM broke above its intermediate downtrend line at RM0.70 in early June and shot up to close at RM1.10 last Friday. The sharp rise will only be sustainable if there is some exciting development ahead. Even if that were the case, the sharply higher prices may have factored in all the good news into the share price.


Chart 2: SCGM's weekly chart as at July 1, 2013_11.45am (Source: quickcharts)

Conclusion

Despite good financial performance, SCGM's recent sharp rise in share price has now put the stock at a demanding valuation. As such, I would revise my rating to TRADING SELL.

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, SCGM.