Fair Value: RM4.52
Recommendation: HOLD
Based on the recent Q2 report, the company's profit had dropped 10.9% compared to the previous quarter. However, its revenue had increased 6.4%. This is most probably due to the strengthening of Ringgit against the US Dollar. Thus, I believe the demand for the company's rubber gloves is still increasing, but most probably at a slower rate compared to during H1N1 outbreak. At worst, I'm expecting the company's profit to remain flat at the next quarter. Thus, I'm revising the Fair Value for this company from RM5.76 to RM4.52 As the current market price is above the current Fair Value, I'm maintaining my recommendation to Hold.
For those of you who have bought this stock earlier based on my recommendation, I'm sorry for causing you to have paper loss. This company's business is quite resillient and its business was not affected during the 2008 US recession and I believe it will not be affected by the current slower global economic recovery as well. Thus, it is safe to average down your cost per share for this company.
Some of you might want to sell off at the current price to cut-lost and hope to buy it back at a much lower price. But personally, I would not recommend you to use this strategy UNLESS you need the money in the short term (within 3 months). Never try to time the market. This is because the market price might or might not drop to my current Fair Value, which is based on my worst expectation that the next quarter profit may remain flat. The market price might not drop much after you've sold it. So if you have the patience to hold on to this stock for a longer term (more than 1 year), the best strategy is to average down.
Investing for the long term has a lower risk of losing money, compared to trading for the short term.
Refer to previous write-up here for more info about this company.
0 comments
Post a Comment