SCGM: Bottom-line rose due to lower material cost

Result Update

For QE31/7/2014, SCGM's net profit increased 41% q-o-q or 13% y-o-y to RM3.5 million while revenue increased by 15% q-o-q or 6% y-o-y to RM27 million. Its revenue increased q-o-q  due to higher demand from Asian & Australian markets. Bottom-line improved due to higher sales & lower raw material costs.


Table: SCGM's last 8 quarterly results


Chart 1: SCGM's last 22 quarterly results

Valuation

SCGM (closed at RM2.38 last Friday) is now trading at a PE of 16 times (based on last 4 quarters' EPS of 15.0 sen). Based on 2-year CAGR for NP for past 2 years of 35%, PEG ratio is still reasonable at 0.5 times.

Technical Outlook

SCGM is clearly in a long-term uptrend. However it could be due for price consolidation after its large price gain of RM1.50 over the past 8 months. If that happens, I believe the RM2.00 psychological support should kick in.


Chart 2: SCGM's weekly chart as at September 12, 2014 (Source: Tradesignum)

Conclusion

Despite good financial performance and fair valuation, SCGM is a good stock for long-term investment. However, its sharp price gain in the past few months could lead to near-term weakness which could present a good opportunity to buy at lower price level.

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.