SCGM: Earnings Increased Sharply

Results Update

In QE31/10/2019, SCGM's net profit rose 83% q-o-q or 144% y-o-y to RM4.0 million while revenue declined 4% q-o-q or 7% y-o-y to RM54 million. The q-o-q decline in revenue was attributed to lower sales contribution from non-customized F&B packaging i.e. lunch boxes, cups and plates. The Group recorded a profit before tax of RM4.2 million in 2Q20, compared to profit before tax of RM2.2 million in 1Q20, in line with lower raw material prices, lower interest expense, higher gain on foreign exchange and higher amount of doubtful debts recovered in 2Q20.

 
Table: SCGM's last 8 quarterly results

 
Graph: SCGM's last 39 quarterly results

Financial Position

SCGM's financial position is deemed adequate with current ratio at 1.26 times while gearing ratio is elevated at 0.87 time.

Valuation

SCGM (closed at RM1.56 yesterday) is now trading at a PE of 26X (assuming the last 2 quarters' EPS can be maintained for a full year).  At this PE, SCGM is deemed fully valued.

Technical Outlook

SCGM broke above its downtrend line at RM0.80 in September. After the breakout, SCGM began a steep uptrend which nearly doubled in price. Its immediate resistance will be from the horizontal line at RM1.60.


Chart 1: SCGM's weekly chart as at Dec 9, 2019 (Source: Malaysiastock.biz)


Chart 2: SCGM's daily chart as at Dec 9, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance & bullish technical outlook, SCGM is a good stock for long-term investment.

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.