Efficen: It broke through the 2006 high!

Result Update

For QE30/6/2014, Efficen's net profit dropped by 7% q-o-q but increased by 17% y-o-y to RM1.5 million while revenue was higher- up 3% q-o-q or 11% y-o-y to RM12 million. For QE30/6/2014, Efficen's PBT increased 12% q-o-q due to increased revenue & continuous cost optimization effort. The higher PBT was despite a building cost written off of RM0.5 mil during the quarter.


Table 1: Efficen's last 8 quarterly results

Efficen's top-line, bottom-line and profit margins are all turning up. This could signal a secular bottom for the stock.


Chart 1: Efficen's last 31 quarterly results 

Valuation

Efficen (closed at RM0.305 on Friday) is trading at a PE of 40 times (based on last 4 quarters' EPS of 0.75 sen). At this PE, Efficen is deemed fully valued. However, if the earnings can pick significantly, the PE will drop back to a more reasonable level.

Technical Outlook

Efficen broke above its triangle formation, ABC at RM0.22 on August 27 (see Chart 2). Earlier, Efficen had already surpassed its long-term downtrend line at RM0.20 (see Chart 3). Efficen rallied passed the 2006 high of RM0.30 before correcting. The big question is whether Efficen will stay above the RM0.30 and rallied again after a period of consolidation or it will falter and slide back below RM0.30. Only time will tell.

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


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

Conclusion

Despite the improved financial performance & bullish technical outlook, it is not easy to call a BUY on Efficen as it is trading at demanding multiple.Since the stock's top-line, bottom-line & profit margins are all turning up, there is a good chance that PE multiple will ease back to a more comfortable level. To be on the safe side, you may want to wait for the earnings to roll in before adding or getting into 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, Efficen.