Gtronic: Top-line and bottom-line plummeted

Result Update

For QE31/3/2019, Gtronic's net profit plummeted 86% q-o-q or 80% y-o-y to RM3.1 million due to sharp drop in revenue of 46% q-o-q or 49% y-o-y to RM44 million. The big drop in revenue and profits was due to the continuing global slowdown affecting the industry which caused volume loadings to drop drastically. In addition, there were unexpected measures taken by certain customers to stop shipments towards the end of March 2019 due to their desire to deplete their inventories in the supply chain.


Table: Gtronic's last 8 quarterly results


Graph: Gtronic's last 53 quarterly results

Financial Position

Despite the weaker performance, Gtronic's financial position is still very healthy with current ratio at 3.8 times and gearing ratio at 0.17 time.

Valuation 

Gtronic (closed at RM1.90 yesterday) is now trading at a PE of 22 times (based on last 4 quarters' EPS of 8.69 sen). At this elevated PER, Gtronic is deemed overvalued.

Technical Outlook

Gtronic has risen off its low at RM1.39 recorded in January this year. The share price rallied twice but failed to test the 200-day SMA line. With the poor result, Gtronic is likely to fall back to test its medium-term uptrend line with support at RM1.77.


Chart 1: Gtronic's daily chart as at Apr 30, 2019 (Source: Malaysiastock.biz)

Chart 2: Gtronic's weekly chart as at Apr 30, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on poor financial performance and demanding valuation, I revise my rating for Gtronic to a HOLD. 

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.