I had been wondering this question, "Why after the company announced a handsome good results, the share price dropped? Doesnt it supposed to go up? And why some ballooned up like no tomorrow?" I guess some of you might be asking the same questions also. After a case study conducted on AWC (7579) and EMETALL (7217), i guess i might have an answer for the question. Most importantly i know how to ride the wind and trade next time.
1. Fundamental Analysis:
Some background on the business model of the company. AWC is a company specialising in quality engineering services. AWC provides total asset management services such as integrated facilities management and engineering services to building owners. AWC is involved in 4 major industries, namely facilities, engineering, environment and investment holding. You can click here to refer to my post on AWC[1]. EMETALL is engaged in manufacture of metalwork and industrial process machinery and equipment. EMETALL had a few subsidiaries; manufacture and distribution of steel products, IT solutions, property sector[2]. I did not go into detail for EMETALL, sorry.
But first, lets go through AWC and EMETALL Quarter Result[3][4].
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| AWC Q3 Result[3] |
AWC announced a very good result. If we compare Q3 2016 with Q3 2015, the net profit improved by 901% (RM5,757k vs RM575k). If we compare with Q2 2015, the net profit improved by 54% (RM5,757k vs RM3,747k). This is definitely the result that we want. Double digit growth. Even with 3 quarters in 2016, the net profit had already exceeded the net profit for the whole 2015. With such momentum, the Q4 will continue to blossom with satisfactory results. Not to forget AWC announced a 1.5 cents of special dividend EX on 16 June 2016.
AWC had been steadily growing with an average net profit margin of 4.71% from 2011 to 2015. it is also a net cash company.
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| AWC: Revenue & Net Profit from 2011 to 2016. 2016 only announced 3 QR[3] |
If you like my way of analysis and you haven't join me in my facebook, appreciate if you could like my FB page, https://www.facebook.com/gainvestor10sai/?fref=ts
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| EMETALL Q1 Result[5] |
EMETALL also announced an excellent Q1 result. If we compare Q1 2016 with Q1 2015, the net profit improved by 14012% (RM11,854k vs RM84k). If we compare with Q4 2015, the net profit improved by 355% (RM11,854k vs RM2,608k). Similar to AWC, EMETALL achieve even a better growth. Bear in mind that lately all the metal stocks had been flying, such as LBALUM, MASTEEL, PMETAL.
EMETALL's revenue and net profit had been bumpy. They suffer a loss in 2014 but quickly recover in 2015. Revenue had been dropping since 2011, bottomed in 2014 and slowly picking up pace. EMETALL is not a net cash company. In conclusion, the fundamental of AWC is definitely better than EMETALL.
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| EMETALL: Revenue & Net Profit from 2011 to 2016. 2016 only announced 1 QR[6] |
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| Comparison between AWC and EMETALL |
The market capitalization for AWC is bigger than EMETALL, which denotes AWC is bigger than EMETALL.
2. Reasons Differentiating AWC and EMETALL:
Why both of them have a different fate, one headed south while one headed north after the QR, even though both of them have similarly good results? The reason might be the VOLUMES prior to the announcement of the Quarter Results. In my analysis, the basis that i use is the duration is taken starting from 1 April, whereby we can notice if the counters might have advanced movement or not.
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| AWC Chart from 1 April till 26 May |
If you notice for AWC, the volumes had been continuously getting attention from a lot of investors since April 2016. The trading volume had been 470 Mil shares traded in the month of April and May. Look at the RSI, it had been overbought for a few weeks. The share price retraced a bit, but after that, it still continue to rocket up. After the Q3 result was announced on 25 May 2016, the share price dropped 8.18% and dropped 4.11% on 26 May 2016. The chart continues to fall down after bearish engulfing. But i believe with the promising future prospects, the share price will continue to go up.
My conclusion is that most of the investors are buying based on the QR strategy. When the QR is announced, investors start to take profit.
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| EMETALL Chart from 1 April till 26 May |
Now, we look at EMETALL chart. The trading volume was only 49 Mil shares traded in the month of April and May. The MACD had been golden crosses and death crosses for a few times. After Q1 result been announced on 24 May 2016, the next day, the chart gapped up with a high volume and go as high as 0.71.
My conclusion is not many investors expect EMETALL to deliver such good result, that is why the volume is not so active prior to the announcement date. But after the QR, it caught investors' attention. That is why the volume spiked up in the next day of its announcement. If investors were to go for long term, please go through the fundamental analysis of the counter.
3. How Do We Ride The Wind or Trade in These Situations?
Towards the end of reporting month, whereby a lot of quarter results will be announced.:
1. We identify the counters that had double digit growth when compared q-o-q and against last quarter. There are a few websites that can help us to screen the quarter results, such as malaysiastock.biz[7] and klse.my[8]
2. Only take note of the counters that had double digit growth in q-o-q and compared against last quarter.
3. Look at the trading volume 2 months prior to the announcement date. If the volume is very active (whereby we see it appears in top 20 active stocks), these counters are NOT our cup of tea. Always remember and take AWC for example. If the volume is not so active prior to the announcement date, we might have a chance to operate these counters.
4. You must also refer to the Bursa Announcements to see if these companies had any shareholders trading information, corporate exercises, or any news.
5. Decide your own strategy or judgements if the counters. To summarize, you only operate on counters that have:
a) Double digit growth in q-o-q and compared against last quarter
b) Trading volume is less active 2 months prior to the announcement date.
c) Refer to Bursa Announcements to avoid unfavourable news
d) Take profit or cut loss; depending on own strategy and judgements.
This is my observation for AWC and EMETALL. This method had not been tested so far but i will be practising it for the next few quarters. Again, you might disagree with my strategies. But do comment and share with me in the comment below. The most important thing is to manage our own risk, because we bear the CONSEQUENCES of our own DECISION. The market is volatile now, please trade/invest with cautious.
Let's Ride the Wind and Gainvest
Gainvestor 10sai
26 May 2016
10.50pm
10.50pm
Sources:
[1]: AWC - AWaCkening: http://gainvestor10sai.blogspot.my/2015/11/awc-awackening.html
[2]: EMETALL: http://klse.i3investor.com/servlets/stk/bizbg/7217.jsp
[3]: AWC Q3 Result: http://www.bursamalaysia.com/market/listed-companies/company-announcements/5101929
[4]: AWC Annual Results:http://www.klse.my/stock/result/financial/last10fy/7579.jsp#stockDetailDiv
[5]: EMETALL Q1 Result: http://www.bursamalaysia.com/market/listed-companies/company-announcements/5101217
[6]: EMETALL Annual Result: http://www.klse.my/stock/result/financial/last10fy/7217.jsp#stockDetailDiv
[7]: Bursa Malaysia Stock - KLSE Latest Quarter Report: http://www.malaysiastock.biz/Latest-Announcement.aspx
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