For QE30/6/2019, TChong's net profit rose 22% q-o-q or 57% y-o-y to RM19 million while revenue dropped 1% q-o-q or 2% y-o-y to RM1.067 billion. The automotive revenue rose 1.3% y-o-y to RM2,096.6 million and EBITDA rose 46.9% y-o-y to RM149.6 million. Automotive division recorded a 1.3%-decline in revenue to RM1,041.7 million, while EBITDA has improved by 16.2% to RM80.4 million. The lower revenue was due to stiff competition in the automotive market. EBITDA improved due to favorable sales model mix.
As at 30/6/2019, TChong's financial position is deemed satisfactory with current ratio at 1.4 times and gearing ratio at 1.0 time.
TChong (closed at RM1.45 yesterday) is now trading at a trailing PER of 7.9 times (based on last 4 quarters' EPS of 18.37 sen). At this PER, TChong is trading at a fairly reasonable value for a turnaround stock.
TChong appears to be making a base at around RM1.30-1.40. Immediate resistance will be at the psychological RM1.50 mark and thereafter at the horizontal line at RM1.65.
Based on improved financial performance, satisfactory financial position and fair valuation, TChong could be a good stock for recovery play.