For QE30/9/2015, TChong's net profit increased by 106% q-o-q or 15-fold y-o-y to RM29 million while revenue was up 9% q-o-q or 20% y-o-y to RM1.37 billion. Revenue increased for all 3 divisions; Automotive, Financial Services & Other Operations by 8.6% to RM1.355 billion, 8.7% to RM14.2 million & 78.3% to RM4.1 million, respectively. This resulted in increase in EBITDA by 43.0% to RM78.7 million, 1.6% to RM6.1 million & 11.0% to RM9.1 million respectively.
Table: TChong's last 8 quarterly results
TChong's revenue continued to rise and the small uptick in profits & profit margins continued to inch higher. We could have seen the worst in TChong's financial performance and recovery is now in progress.
Chart 1: TChong's last 36 quarterly results
Valuation
TChong (closed at RM2.88 yesterday) is now trading at a PER of 324 times (based on last 4 quarters' EPS of 12 sen). At this PER, TChong is deemed overvalued. However, with earnings on the rise, PER will continue to rollback and valuation will become more appealing in the next few quarters.
Technical Outlook
TChong has rebounded after testing the 'horizontal line', AB (see Chart 2). It will soon test its intermediate downtrend line, SS at RM3.00 (see Chart 3). If it succeeds in breaking thru the downtrend line and it will have a chance to test the horizontal line at RM4.00.
Chart 2: TChong's monthly chart as at Nov 18, 2015 (Source: ShareInvestor.com)
Chart 3: TChong's weekly chart as at Nov 18, 2015 (Source: ShareInvestor.com)
Conclusion
Based on improved financial performance, TChong could be a good stock for recovery play. However, it must be noted that the technical outlook is still far from bullish. If it can break above the RM3.00 downtrend line, the technical outlook would change and the upleg could then begin.
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.
3 comments:
Sir,
I am not very confident with the Automotive sector for the following reasons:
1) Depreciation of the ringgit will result in an increase in cost of materials resulting in lower margin/profit.
2) Slow down of economy, consumers will delay buying decision or opt for lower value National cars.
3) Banks have tighten their credit requirements. This is a positive to their credit business but negative to sales of cars.
4) Cost of living has gone up post GST, consumers will take time to adjust to 'new' living standards, again resulting in delayed buying decision.
5) Aggressive rebates/promotion by competitors. Will have to follow suit and squeeze margins.
6) HP interest rates have been inching higher.
Hi Balvinder Singh
Thank you for sharing.
Most of the points highlighted by you are valid. We will have to wait & see how the next few quarters will be panned out.
hi Alex,
instaco, seriously???
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