Gtronic: Profit keeps rolling in

Result Update

For QE30/6/2014, Gtronic's net profit increased by 23% q-o-q & y-o-y to RM17.3 million while revenue increased by 9% q-o-q or 6% y-o-y to RM91 million.

Revenue increased q-o-q due to increased revenue from the Singapore segment, from RM24.8 million to RM28.9 million (increase of 16.5%). Malaysia segment recorded the highest revenue of RM58 million for the quarter, an increase of 4.7% as compared to the last quarter.

The higher net profit achieved (23% improvement q-o-q) was mainly due to higher volume loadings from most of the Group's customers, better economy of scale coupled with productivity improvement & cost control programme carried out in the Group.


Table 1: Gtronic's last 8 quarterly results

Looking at Chart 1 below, one can't help but admire Gtonic. This is a company that grows its top-line not at the expense of its bottom-line. In fact, its profit margin is steadily rising. You can only do that if you are ahead of your competitors and are able to command premium pricing.


Chart 1: Gtronic's last 29 quarterly results
  
Valuation 

Gtronic (closed at RM4.65 yesterday) is now trading at a PE of 22 times (based on last 4 quarters' EPS of 21.5 sen). At that PE multiple, Gtronic is deemed fairly valued.

Technical Outlook

Gtronic has been in a steady uptrend after breaking above its Cup-with-handle formation in early 2013. The stock is presently trading in overbought territory and could face short-term profit-taking. If the profit-taking is not excessive, the stock may continue its uptrend to test its 2000 high of RM5.00.


Chart 2: Gtronic's weekly chart as at Aug 5, 2014 (Source: Tradesignum)


Chart 3: Gtronic's monthly chart as at Aug 5, 2014 (Source: Chartnexus)

Conclusion

Based on good financial performance, Gtronic remains a good stock for long-term investment. Its upside potential is limited as it is trading at fair valuation.

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, Gtronic.