Gtronic: Where's The Earning Recovery?!

Result Update

For QE31/12/2016, Gtronic's net profit dropped 30% q-o-q or 58% y-o-y to RM6.4 million while revenue dropped 11% q-o-q or 39% y-o-y to RM47 million. Revenue dropped q-o-q due to the continuous softer volume loadings from some of the Group's customers as a result of reduction in end customers' demand. Net profit dropped q-o-q softer volume loadings; lower grant income of approximately RM0.6 million recognized as compared to preceding quarter of RM1.4 million; and higher taxation expense of RM2.3 million compared to preceding quarter of RM1.3 million.


Table 1: Gtronic's last 8 quarterly results


Chart 1: Gtronic's last 44 quarterly results

Valuation 

Gtronic (closed at RM4.33 last Friday) is now trading at a PE of 47 times (based on last 4 quarters' EPS of 9.13 sen). At that PER, Gtronic is deemed overvalued with no sign of a rebound in both top-line nor bottom-line.

Technical Outlook

Gtronic broke above its downtrend line, RR at RM3.50 in late December. It has since rallied above its rising wedge, ABCD at RM4.30 in early February. If Gtronic can stay above the upper line of the wedge, it may continue to inch up. Given the poor result, it is fairly likely that the share price will not hold above this line.


Chart 3: Gtronic's weekly chart as at Oct 25, 2016 (Source: ShareInvestor.com)

Conclusion

Based on poor financial performance, demanding valuation and precarious technical breakout, Gtronic is looking less like a good Trading BUY since the release of its latest quarterly result. If it cannot stay above the RM4.30 mark, Gtronic will slide back into the wedge. In that case, it would be advisable to close your trade.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.