Gtronic: Opportunity In A Sharp Drop? (UPDATED)

Technical Development

Gtronic dropped 85 sen to close at RM4.44 yesterday. There is no news which may explain the price decline.


Chart 1: Gtronic's daily chart as at April 26, 2016_10.00am (Source: ShareInvestor.com)
 
Chartwise, we can see that Gtronic broke its uptrend line, SS at RM6.20-6.30 in early 2016. The immediate support is at the psychological RM4.00 mark. Below that, it may find support from the 2000 highest close of RM3.50. See Chart 2.


Chart 2: Gtronic's monthly chart as at April 26, 2016_10.00am (Source: ShareInvestor.com)
 
From the weekly chart, we can see that the stock may also find support at the horizontal line at RM3.80.


Chart 3: Gtronic's weekly chart as at April 26, 2016_10.00am (Source: ShareInvestor.com)

Recent Financial Results (UPDATED!)

In QE31/3/2016, net profit dropped 76% q-o-q or 79% y-o-y to RM3.7 million while revenue dropped 24% q-o-q or 34% y-o-y to RM59 million. The lower revenue and net profit achieved in the quarter was mainly due to lower volume loadings from some of the Group's customer as a result of reduction in end customers' demand and forex loss of RM4.8 million. However, there are reports that demand may be weak going forward due to slower demand for some electronic products, such as smartphones.


Table: Gtronic's last 8 quarterly results

The top-line and bottom-line dipped as had happened in the past 3 years.


Chart 4: Gtronic's last 36 quarterly results

Valuation

Gtronic (at RM4.21 as at 11.00am) is now trading at a PER of 15.8X (based on last 4 quarters' EPS of 25.35 sen). If its recent growth can sustain, this PER is deemed fair. DY is decent at 3.1%.

Conclusion

Based on satisfactory financial performance in the past and fairly reasonable valuation, Gtronic could be a good stock for long-term investment. As the technical outlook has turned negative, any buying should be carried out SLOWLY at the cluster for support between RM3.50 & RM4.00.

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, Gtronic.