TChong: Improved sequential earnings

Result Update

For QE31/3/2015, TChong's net profit soared 204% q-o-q to RM26 million while revenue rose 24% to RM1.569 billion. Compared to the same quarter last year, net profit was down 36% despite a 25%-rise in revenue.

Revenue rose q-o-q due 24.3%- increase in revenue from Vehicle Assembly, Mfg, Distribution & After-Sale Services Division. This was mainly due to higher sales volume arising  from  the  strong sales and marketing efforts. EBITDA rose 97.7% q-o-q due to realignment of sales strategy and promotional campaigns.

The Financial Services division enjoyed a 10.9%-increase in revenue to RM14.4 million while EBITDA rose from RM2.2 million to RM7.1 million. Other Operations division saw its revenue rose from RM3.5 million to RM4.1 million but its EBITDA dropped RM11.8 million to RM5.6 million as the preceding quarter's EBITDA was boosted by an one-off revaluation gain from investment properties.


Table: TChong's last 8 quarterly results


Chart 1: TChong's last 34 quarterly results

Valuation

TChong (closed at RM3.05 yesterday) is now trading at a PE of 22 times (based on last 4 quarters' EPS of 13.9 sen). At this PE multiple, TChong is deemed over valued.

Technical Outlook

TChong is in a long-term upward channel that started in 1999. However, it is trending down over the past 2 years after it tested the upper boundary of that channel. I am doubtful TChong will test the lower boundary at RM1.80-2.00. It has already showed signs of bottoming at around RM3.00. If this fails to hold up the stock, the next support will be the horizontal line at RM2.20.


Chart 2: TChong's weekly chart as at May 14, 2015-9.45am (Source: Tradesignum)

Conclusion

Despite the poor financial performance, demanding valuation & bearish technical outlook, TChong is a good stock for long-term investment. For now, it is worth close monitoring to ascertain whether the RM3.00 support is the base from which the stock would stage its recovery.

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, TChong.