Scicom: A decent stock for the long run, not now

Background

Scicom (MSC) Bhd ('Scicom') is mainly involved in the provision of customer service outsourcing services

Recent Yearly Results

Scicom's top-line and bottom-line have been growing steadily over the past 10 years.


Chart 1: Scicom's last 10 yearly results

Recent Quarterly Results

From the table & chart below, we can see that revenue & profits exhibit slow & steady growth in the past 10 quarters. For QE30/6/2015, revenue increased q-o-q due to due to increase in billable headcounts for existing projects (RM5.31 million), ad-hoc projects (RM1.79  million) and new projects secured  (RM1.39million). PBT rose q-o-q due to an increase in profitability  for outsourcing projects coupled with the recognition of a higher foreign exchange gain.


Table: Scicom's last 10 quarterly results


Chart 2: Scicom's last 10 quarterly results

Financial Position

Scicom's financial position is deemed satisfactory as at 30/6/2015. Its current ratio stood at 14 times while gearing 0.2 time.

Valuation

Scicom (closed at RM1.75 last Friday) is now trading at a PER of 17 times (based on last 4 quarters' EPS of 10.2 sen). At this PER, Scicom is fairly valued.

Scicom paid dividend totaling 7.5 sen and 7.0 sen for FY2015 & FY2014. Based on the latest dividend payout, its DY is quite decent at 4.3%.

Techncial Outlook

Scicom broke above its strong horizontal resistance at RM0.50 in October 2013 and rallied to a high of RM2.36 in April 2015. The stock then dropped back & broke its uptrend line support at RM2.00 in June. The MACD signal line is poised to cut below the MACD while ADX indicates the upward momentum is gone. All in all, I think the top is probably in for Scicom. Its immediate strong support is at RM1.20- which is quite a distance from the current price of RM1.64.


Chart 3: Scicom's monthly chart as at Aug 21, 2015 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance & position; steady growth; and, decent valuation, Scicom is a good stock for long-term investment. Given its bearish technical outlook, you can wait for the prices to roll down before committing.

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, Scicom.