For QE31/5/2016, Ajiya's net profit dropped 69% q-o-q or 84% y-o-y to RM1.0 million while revenue was mixed- rose 8% q-o-q but dropped 9% y-o-y to RM101 million.Net profit peaked a year ago and it has been sliding since due to lower revenue or lower margin or provision for doubtful debts.
Table: Ajiya's 8 quarterly results
Chart 1: Ajiya's 39-quarter top-line & bottom-line performance
Ajiya (closed at RM4.13 last Friday) is now trading at a trailing PE of about 21 times (based on last 4 quarters' EPS of 19.65 sen). At this multiple, Ajiya is fully valued.
Ajiya has risen substantially since my last post in October 2009. The stock is in an irregular upward channel, with resistance at RM5.00 & support at RM2.50.
Chart 2: Ajiya's monthly chart as at July 22, 2016 (source: Shareinvestor.com)
If you compared its the share price movement with its profit trend, you will see a persistent divergence. This is made worse by the recent decline in bottom-line while share price pulled away from RM2.80-3.00 level. This divergence must be corrected by either a price retracement or a rebound in earnings or both. (Note: These words were accidentally left out.)
Chart 3: Ajiya's monthly chart as at July 22, 2016 & Profits from 2006-2016 (source: Shareinvestor.com)
Based on weak financial performance and demanding valuation, Ajiya is rated a SELL INTO STRENGTH.
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, Ajiya.
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