Gtronic: Earnings Stabilized

Result Update

For QE30/6/2016, Gtronic's net profit increased by 77% q-o-q to RM6.5 million while revenue was dropped 2% q-o-q to RM57 million. Compared to the same quarter last year, net profit dropped 64% while revenue was down by 36%.

Revenue dropped q-o-q due to the continuous softer volume loading from some of the Group's customer as a result of reduction in end customers' demand. Net profit rose q-o-q mainly due to cost control program carried out in the Group and forex gain (net) recognized (RM341K) compared to forex loss incurred in the preceding quarter.

Table 1: Gtronic's last 8 quarterly results


Chart 1: Gtronic's last 38 quarterly results
  
Valuation 

Gtronic (closed at RM3.27 yesterday) is now trading at a PE of 20 times (based on last 4 quarters' EPS of 16.49 sen). At that PER, Gtronic is deemed fully valued.

Technical Outlook

Due to sharp drop in earning, Gtronic share price plunged in April to the level of the 2004 high of around RM3.00.


Chart 2: Gtronic's monthly chart as at July 26, 2016 (Source: ShareInvestor.com)

Gtronic may have found a base for the share price to consolidate. ADXR has eased back to indicate a lessening of the downtrend momentum. MACD has also flashed a bullish crossover. Nonetheless, it is still too early to be overly bullish on this stock,


  Chart 3: Gtronic's weekly chart as at July 26, 2016 (Source: ShareInvestor.com)

Conclusion

Based on earning stabilization & possible base formed for the share price, Gtronicis now rated a HOLD. I would like to see a rebound in revenue & continued improvement in earning before calling a BUY on the stock.

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.