SCGM: Earnings Stagnated

Results Update

In QE30/4/2017, SCGM's net profit was mixed- dropped 27% q-o-q but rose 47% y-o-y to RM5.1 million while revenue rose 15% q-o-q or 63% y-o-y to RM53 million. Revenue increased q-o-q due to higher demand from both local and export markets. PBT dropped q-o-q mainly due to increase in operating expenses which was attributed to higher cost of raw materials.

 
Table: SCGM's last 8 quarterly results

 
Graph: SCGM's last 33 quarterly results

Valuation

SCGM (closed at RM4.09 yesterday) is now trading at a PE of 24X (based on last 4 quarters' EPS of 17.17  sen). With earning stagnating, the high PER is not justifiable.

Technical Outlook

SCGM is in a long-term uptrend line, SS with support at RM3.60-3.70. MACD has hooked down- indicating the possibility of a near term pullback. This is also borne out by directional movement index, with +DMI is dipping while -DMI is rising.


Chart 1: SCGM's monthly chart as at Jun 21, 2017 (Source: Malaysiastock.biz)


Chart 2: SCGM's daily chart as at Jun 21, 2017 (Source: ShareInvestor.com)

Conclusion

Despite satisfactory financial performance & still positive technical outlook, I am revising my previous rating from a Trading BUY to a SELL INTO STRENGTH due to demanding valuation.

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.