WTHorse: Bottom-line took a hit

Result Update

For QE30/9/2015, WTHorse reported a net loss of RM21 million- it's first quarterly loss in the past 11 years. Revenue was down 3.5% q-o-q or 6.5% y-o-y to RM178 million.

The loss arose due to the unrealized foreign exchange loss of RM18.494 million resulting from the weakening of Ringgit  Malaysia, Vietnamese Dong and Indonesian Rupiah against the United State Dollar denominated borrowings/payables. This forex loss, which increased from RM9.070 million in QE30/6/2015 & RM4.753 million in QE31/3/2015, is a reflection of the substantial strengthening of USD against many Asian currencies.


Table: WTHorse's last 8 quarterly results


 Chart 1: WTHorse's last 41 quarterly results

Valuation

WTHorse (closed at RM2.39 yesterday) is trading at a PE of 22 times (based on last 4 quarters' EPS of 11 sen). While this PER looks high, the earning could recover easily if MYR and other Asian currencies were to strengthen in the near future.

Technical Outlook

WTHorse is in a long-term uptrend line, with support at RM2.20. If this support is violated, it may drop to the psychological RM2.00 mark. If there is no quick recovery - or if the construction sector remains weak - the company's earnings and share price may continue to weaken. If this negative scenario does not occur, then we should see a recovery back to the long-term uptrend line. Immediate resistance is at the recent high of RM2.40-2.45.


Chart 2: WTHorse's monthly chart as at Nov 24, 2015 (Source: ShareInvestor)

Conclusion

Based on weaker financial performance and uncertain technical outlook, I would rate WTHorse as a REDUCE.

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, WTHorse.