For QE31/5/2016, Ajiya's net profit dropped 69% q-o-q or 84% y-o-y to RM1.0 million while revenue was mixed- rose 8% q-o-q but dropped 9% y-o-y to RM101 million.Net profit peaked a year ago and it has been sliding since due to lower revenue or lower margin or provision for doubtful debts.
Table: Ajiya's 8 quarterly results
Chart 1: Ajiya's 39-quarter top-line & bottom-line performance
Valuation
Ajiya (closed at RM4.13 last Friday) is now trading at a trailing PE of about 21 times (based on last 4 quarters' EPS of 19.65 sen). At this multiple, Ajiya is fully valued.
Technical Outlook
Ajiya has risen substantially since my last post in October 2009. The stock is in an irregular upward channel, with resistance at RM5.00 & support at RM2.50.
Chart 2: Ajiya's monthly chart as at July 22, 2016 (source: Shareinvestor.com)
If you compared its the share price movement with its profit trend, you will see a persistent divergence. This is made worse by the recent decline in bottom-line while share price pulled away from RM2.80-3.00 level. This divergence must be corrected by either a price retracement or a rebound in earnings or both. (Note: These words were accidentally left out.)
Chart 3: Ajiya's monthly chart as at July 22, 2016 & Profits from 2006-2016 (source: Shareinvestor.com)
Conclusion
Based on weak financial performance and demanding valuation, Ajiya is rated a SELL INTO STRENGTH.
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, Ajiya.
Hi Alex,
ReplyDeleteCan you kindly comment on fundamental and technical outlook for SOP ? Thank you very much !
Hi Alex,
ReplyDeleteAjiya's share price is firm even after poor set of results. Your sell call is justified. There is no doubt.
Hi luckystock2
ReplyDeleteSOP broke its long-term uptrend line at RM4.50 in August/September 2015. It tried to come back above the uptrend line in October/November 2015 & again in March 2016. In both occasions, the share price slipped back below the long-term uptrend line.
Financial performance is exciting. Its financial position is a bit of a concern due to rapid expansion. Its total liabilities to equity has risen from 0.56x five years ago to 1.05x as at 31/12/2015. This is due to rapid growth in total assets, with total assets to equity growing from 1.68x to 2.13x during the same period.
The stock is now holding precariously onto to its immediate support at RM3.50-3.60. If this support fails, its next support will be at RM3.00 & then at RM2.50. I feel that the share price should hold at these levels, probably between RM300 & RM3.60. At RM3.60. its trailing PER is about 15x (based on last 4 quarters' EPS of 23.74 sen) while its price to boo ratio is about 1.1x (based on NTA of RM3.21 ps as at 31/3/2016).
On balance, I believe the stock could be a good long-term buy at RM3.00-3.60.
Hi ronnie
ReplyDeleteI must admit that I overlooked Ajiya's share split. That helps to maintain the share price at the adjusted RM1.00 level.
http://www.bursamalaysia.com/market/listed-companies/company-announcements/5156049