Yesterday, Cypark broke above the neckline of its inverted head & shoulders formation at RM1.92-1.94. This breakout was not accompanied by increased volume. To be sure, we want to see increased volume today and preferably a convincing upside breakout of the psychological RM2.00 mark. If these 2 conditions are met, then we would have a bullish reversal and the stock could potentially rally to the first target of RM2.55 in the matter of a few weeks. See Chart 1.
Chart 1: Cypark's weekly chart as at
Over the longer time horizon, a confirmed inverted head and shoulders reversal could be the start of the next upleg for the stock. From Chart 2, you can see that the line connecting the two past peaks would put the upper limit of the potential upleg at RM2.90-2.95.
Chart 2: Cypark's monthly chart as at
Background
Cypark is involved in landfill restoration, renewal energy and environmental & landscape management.
Picture: Renewal Energy Park & Landfill
Result Update
For QE31/10/2015, Cypark's net profit dropped 33% q-o-q but rose 27% y-o-y to RM8 million while revenue dropped 9% q-o-q but rose 11% y-o-y to RM56 million. Revenue dropped q-o-q mainly due to the decrease in work activities for some of the landscaping and infrastructure projects which were near to its completion in current quarter. PBT also dropped q-o-q due to lower revenue generated and recognition of unrealised foreign exchange losses in current quarter. (Note: This latest result was announced on December 31, 2015.)
Table: Cypark's last 8 quarterly results
Chart 3: Cypark's last 22 quarterly results
Financial Position
As at 31/10/2015, Cypark's financial position is fairly tight. Current ratio stood at 0.96X while gearing ratio stood at 1.27X. After netting out cash & bank balances, gearing ratio would be lower to 0.55X. The group has large receivable which translated to an outstanding holding period of 236 days.
Cypark is continuously raising its share capital to buttress its tight financial condition (here and here). This has increased the number of shares outstanding to 248.7 million today.
Valuation
Cypark (closed at RM1.96 yesterday) is now trading at a PE of 8.9 times (based on last 4 quarters' EPS of 21.63 sen). At this multiple, Cypark is deemed fairly valued.
Conclusion
Despite the satisfactory financial performance (albeit recent drop in earning), reasonable valuation and potentially bullish technical outlook, Cypark is a good stock for a trading BUY or a medium-term investment.
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, Cypark.
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