Stock Investing and Trading Strategies

CG Technologies ($0.34)

CG Technologies reported on 13 August 2006 that its first half earnings for FY2006 rose 142% year-on-year (YoY) to RMB61.7million as revenue doubled to RMB299.3mil. Gross profit margin improved from 24.7% to 26.4%. The company said the strong performance was attributed to stronger than expected product demand coupled with the company’s push to raise production capacity and focus on higher margin products.

The strong performance is likely to continue into second half of FY2006. The company has increased its full year net profit guidance from RMB104.5million to RMB125.4million. Net profit for second half should improve by 43% YoY to RMB63.7million. Earning per shares (EPS) is expected to come in at RMB0.482 (SGD 9.6 cents).

Base on the number of shares of 260 million, and expected FY2006 EPS of SGD 9.6 cents, at current price of SGD0.34, CG Technologies is trading at a forward PE of only 3.54 times.

Technically, as the stock price made a higher high recently to $0.37, MACD indicator failed to confirm the price movement but showed a bearish divergence instead. The price has since retraced to $0.325 on 25 August and seem to find support at the 100-day exponential moving average (EMA).

Watch for the red MACD line to cross back above the blue signal line and the price to close above the short term 20-day EMA(0.343) to pave the way for further upside.

MFS Tech - $0.835 (+0.05)

Singapore listed MFS Technology rebounded from a low of $0.650 on 23 August to touch a high of $0.900 on early trade, after US-listed Multi-Fineline Electronix’s (M-Flex’s) announced that the Securities Industry Council (SIC) rejected application to withdraw its bid to take over MFS Technology. M-Flex intends to appeal against such denial.

The take over offer for MFS Technology was first announced in March, which calls for M-Flex to pay MFS shareholders 1.15 sgd per share held if acceptances amount to less than 90 percent, and 1.20 sgd per share if acceptances exceed 90 percent. MFS. MFS shareholders were also given the option to receive 0.0145 new M-Flex shares for each MFS share they own in lieu of cash, regardless of the level of acceptances for M-Flex’s offer.

However, M-Flex’s special committee decided that the take over offer was a no go after MFS Technology reported that its net profit for the fiscal third quarter ended June plunged to SGD1.04 million from 6.54 mln sgd a year earlier because of lower sales and margin pressures.

Immediate price resistance for MFS stock likely to be $0.900 - $0.910.
Watchout for the long term 200-day EMA, currently at 0.97, which likely to post another resistance level.

Raffles Education - $2.64 (+$0.07)

Raffles Education reported FY2006 net profit rose by 87.5% to S$32.27 million. The increase in revenue was attributed to rise in student enrolment and contribution from its subsidiaries, Path Education Corp and Hartford Education Corporation Limited.

The company has proposed a dividend of 1.8 cents and distributing 1 Hartford share for every 12 Raffles Education shares held by its shareholders. In addition, the company is proposing a share split of 1 into 2 to increase liquidity.

DBS Vickers said that the company is capable of continuing the strong growth momentum over the next three years. The brokerage expect a 29% compounded annual growth rate from its current student base of 7,000. The brokerage house has a target of S$3.22 per share for Raffles Education.

OCBC Securities also has a buy call for the education provider with a target price of S$2.98 per share.

Technically, the stock has a price resistance level at $2.75.