Cocolnd did it. Can OFI do the same?
Over the past few weeks, we noticed strong buying of consumer stable stocks. Among these stocks, the top performers are Cocoaland Holdins Bhd ('Cocolnd') and Oriental Food Industries Holdings Bhd ('OFI'). Cocolnd broke above its strong horizontal resistance at RM1.50 on June 16 and has rallied steadily to about RM2.75 (its closing price at the end of the morning session today). See Chart 1 below.
Chart 1: Cocolnd's weekly chart as at July 19, 2010 (Source: Tradesignum)
Cocolnd is a small-cap consumer company, which reported a net profit of RM19.7 million on turnover of RM133 million for FYE31/12/2009. In FY2008, it recorded a net profit of RM8.7 million on turnover of RM129 million. Based on the closing price RM2.75, Cocolnd is trading at a trailing PER of 17 times (based on EPS of 16.4 sen for FY2010).
Like Cocolnd, OFI has also seen an increase in its top-line and bottom-line over the past 2 financial years. For FY2010, OFI's net profit increased by 126% to RM12.4 million on the back of a 6%-growth in turnover to RM126 million. Based on the closing price of the morning session of RM2.09, OFI is trading at a trailing PER of 10 times (based on EPS of 20.7 sen for FY2010).
The financial position of Cocolnd & OFI is about the same for their last financial year. Current ratios are very high at 2.9 times for Cocolnd or 3.8 times for OFI. Borrowing is minimal for both companies, with gearing ratio at less than 0.1 time for either company.
OFI has broken above its trading range between RM0.60 & RM1.90 on July 16 (as well as its January 2010 high of RM1.85). It has since surpassed the high of 2004 & the all-time high (recorded in 2000) of RM2.00 & RM2.08, respectively. In technical analysis, a stock that has surpassed its all-time high tends to continue to rise- like Cocolnd. Would OFI do a Cocolnd? We will have to wait & see.
Chart 2: OFI's weekly chart as at July 19, 2010 (Source: Tradesignum)
Based on valuation, I would prefer OFI to Cocolnd. However, I am very weary of a stock that has broken through so many resistance in such a short span of time. If one likes to get into this stock, the safer approach would be to wait for a pullback to either the psychological RM2.00 or the breakout level of RM1.90. However, a break below the RM1.90 level would be a bearish sign, especially if accompanied by high volume. Both Cocolnd & OFI are presenting us with trading opportunities. However, these trading propositions are very risky. If you choose to go in, do so with tight protective stop.
Chart 1: Cocolnd's weekly chart as at July 19, 2010 (Source: Tradesignum)
Cocolnd is a small-cap consumer company, which reported a net profit of RM19.7 million on turnover of RM133 million for FYE31/12/2009. In FY2008, it recorded a net profit of RM8.7 million on turnover of RM129 million. Based on the closing price RM2.75, Cocolnd is trading at a trailing PER of 17 times (based on EPS of 16.4 sen for FY2010).
Like Cocolnd, OFI has also seen an increase in its top-line and bottom-line over the past 2 financial years. For FY2010, OFI's net profit increased by 126% to RM12.4 million on the back of a 6%-growth in turnover to RM126 million. Based on the closing price of the morning session of RM2.09, OFI is trading at a trailing PER of 10 times (based on EPS of 20.7 sen for FY2010).
The financial position of Cocolnd & OFI is about the same for their last financial year. Current ratios are very high at 2.9 times for Cocolnd or 3.8 times for OFI. Borrowing is minimal for both companies, with gearing ratio at less than 0.1 time for either company.
OFI has broken above its trading range between RM0.60 & RM1.90 on July 16 (as well as its January 2010 high of RM1.85). It has since surpassed the high of 2004 & the all-time high (recorded in 2000) of RM2.00 & RM2.08, respectively. In technical analysis, a stock that has surpassed its all-time high tends to continue to rise- like Cocolnd. Would OFI do a Cocolnd? We will have to wait & see.
Chart 2: OFI's weekly chart as at July 19, 2010 (Source: Tradesignum)
Based on valuation, I would prefer OFI to Cocolnd. However, I am very weary of a stock that has broken through so many resistance in such a short span of time. If one likes to get into this stock, the safer approach would be to wait for a pullback to either the psychological RM2.00 or the breakout level of RM1.90. However, a break below the RM1.90 level would be a bearish sign, especially if accompanied by high volume. Both Cocolnd & OFI are presenting us with trading opportunities. However, these trading propositions are very risky. If you choose to go in, do so with tight protective stop.
Date: 2010-07-21 12:45:00
Source: Cocolnd did it. Can OFI do the same?
URL: http://nexttrade.blogspot.com/2010/07/cocolnd-did-it-can-ofi...
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