SOLUTN (0093) SOLUTION ENGINEERING HOLDINGS BHD A NET CASH TECH COMPANY WORTHWHILE TO KEEP !!!
A NET CASH TECH COMPANY WORTHWHILE TO KEEP !!!
Hello to all readers out there. Our market was quite vibrant today, wich continuation of sentiment in penny stock counters dominating the trend. Well you know what they say, "if you can't fight them, join them".
Having said the above, the stock which I'd like to talk about today is SOLUTION GROUP BERHAD (SOLUTN - Stock Code 0093, ACE Market, Technology - Digital Services)
BASIC INFORMATION ABOUT SOLUTN
SOLUTN was founderd in 1988 with core businesses in a few field:
i) Teaching equipment development and supply for engineering education
ii) Industrial automation
iii) Industrial lubricants
Market Capitalization : RM 30.65 million
Shares Float : 306.45 million
Website : http://www.solution.com.my/
1. NET CASH COMPANY - WITH ASSETS FAR SURPASSING LIABILITIES
Refer below latest Assets Versus Liabilities sheet for SOLUTN.
As we can see they have total ASSETS of RM 48.8 mil against LIABILITIES of RM 10 million. Also to be noted a cash total of RM 16.3 million in the bank which is more than enough to pay off all existing current and long term liabilities, which makes this company a NET CASH company.
2. BUSINESS PROSPECTS TO IMPROVE AFTER COVID19 PANDEMIC EASENING
Following are the prospects of the group, post COVID19 pandemic, as extracted from their latest QR and also Annual Report:
a) Engineering Equipment Segment : Government allocation of RM 5.9 billion for TVET program, which SOLUTN is able to capitalize on as their expertise in development, training and supply of engineering equipment for higher level institutions
b) Industrial Automation Segment : As Malaysia moving towards Industry 4.0, thsi will lead in demand for industrial automation & system integration services, as SOLUTN will be able to offer this to companies willing to invest
c) Industrial Lubricants Segment : As more vehicles go back to the road post COVID19, lubricant utilization is expected to pickup in upcoming quarters
d) Solar Power New Business Segment : SOLUTN has successfully registered as a SEDA system integrator in first half of 2019 for the design, supply and installation of photovolatic system. They foresee this segment to contribute positively to FY2020 revenue
3. TECHNICAL ANALYSIS - FORMING CUP AND HANDLE PATTERN, PENDING
BREAKOUT ABOVE EMA365 AT 10 CENTS ON THE BACK OF IMPROVED
TRADING INTEREST IN THE STOCK
Refer below the basic price and volume chart with key EMAs for SOLUTN daily chart :
A few observations on the daily chart chart:
i. SOLUTN had been trading at 34c in July 2017 and started to downtrend
ii. Recently hit a lot in March 2020 during the flash crash, however we can observe that low volumes selling during the low prices, indicating only weak sellers exiting
iii. Refer Circle 1, SOLUTN had formed a Cup and Handle Pattern with breakout pending at EMA365 of 10c, which would see further upside should a strong breakout happen
iv. Refer Circle 7 & 8, after the recent retracement, it looks like volumes of buyers are starting to take interest in this stock again and coincidentally, the next EMA resistance of EMA200 at 22c is the point of cup and handle breakout
v. Refer Circle 2, it it seen that volume trading is significantly increasing in this counter
vi. Resistance levels 13c and 16c next to be tested for further uptrend
4. CHEAPER ENTRY INTO SOLUTION VIA SOLUTION-WARRANTS A (SOLUTN WA)
Following is the profile of SOLUTION-WARRANTS A, for traders looking at lower cost entry into this stock. A few comments:
i. Maturity is July 2021, hence another 13 months to go to expiry
ii. Premium of 120% is considered quite reasonable, with the amount of life left for this warrant
iii. Strike price of 20c, which is 10c from the latest mother shares closing price
iv. Potentially, price can break out above 3c, if the mother shares are able to trade at least within 13-15c range or above
Considering all the above, I opine that current price for SOLUTN is attractive due to below:
i) Net cash company
ii) Business prospects improving post COVID19 pandemic
iii) Chart showing bullish cup and handle pattern, pending breakout above 10c towards 13c and 16c
LET’S SEE HOW THE SHARE PRICE MOVEMENT IN THE NEAR FUTURE FORBEARING ANY GOOD CORPORATE NEWS.
Disclaimer : The above opinion is never intended to be a BUY CALL whatsoever. I am sharing my observations ONLY based on fundamental; past history; current trading pattern; charts etc. Please make your own informed decision before buying this share or whatever share for that matter.