Wellcal- time for profit-taking

Technical Outlook

Wellcal has risen about 100% over the past 10 months. While it is still in an uptrend, we have to be a bit careful with this stock. Its MACD, RSI & ADX indicators have started to hook down. These are signs that the stock is likely to consolidate in the near term.


Chart 1: Wellcal's weekly chart as at Jan 16, 2014 (Source: Tradesignum)

Results Update

For QE30/9/2013, Wellcal's net profit increased by14% q-o- & 31% y-o-y to RM7.7 million while revenue dropped by 5% q-o-q & 11% y-o-y to RM33.7 million. Bottom-line improved due to lower cost of raw material, favorable exchange rate & higher sales of more profitable products.


Table: Wellcal's last 8 quarterly results


Chart 1: Wellcal's last 25 quarterly results

Valuation

Wellcal (closed at RM3.53 on Jan 16, 2014) is trading at a PE of 19 times (based on last 4 quarters' EPS of 18.6 sen). The stock is trading near its fully value.

Conclusion

Despite good financial performance and still-positive technical outlook, Wellcal is trading at demanding valuation. Based on this, I think it is time to take profit on the stock.

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, Wellcal.