How pertinent is KYY golden rule?

Koon Yew Yin 16 Dec 2020 

As you know, I posted several articles pointing out Supermax’ 1st quarter ending Sept. EPS 30.58 sen and its profit for the next few should be much better due to the shortage of glove supply during the current Covid 19 pandemic. But its price chart is showing down trend. I did not believe it and I continue to buy with all my money to fight against the down trend price chart in vain.

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I learned an expensive lesson because I did not believe in its down trend price chart. I was shocked to see that it plunged 80 sen on Monday. 

Top Glove’s quarter ending November EPS 29.64 sen and its previous quarter was 5.32 sen, an increase of 5.7 times. Its price chart is also showing down trend.  

Based on Top Glove’s performance, Supermax’s next quarter ending December EPS should be another record high. To be safe and conservative, if I assume its profit is 2 times and not as good as Top Glove’s 5.72 times, its 2nd quarter should be 61.2 sen, totalling 92 sen for half year. Again if I assume that its profit for each of the next 2 quarters remains the same as 61.2 sen, its annual EPS will be Rm 2.14. 

Based on PE 15, my target price is Rm 30. Based on PE 10, my target price is Rm 21 which is easily achievable.       

Yet its price chart is showing down trend. 

Recently I have studied some of the stocks recommended by my friends namely, Cypark, Slvest, Samaiden, WCE, CSCstel, Carimin, Engtex, Petron, etc etc. 

All these stocks have up trending price charts and also reported increased profit for their recent quarter. But the current Covid 19 pandemic will most likely affect their profit for their next quarter. 

It is safer to buy any stock if it can report increasing profit for at least 2 quarters. 

KYY golden rule

The stock must have reported increasing profit for 2 quarters and it is selling at projected PE below 15. 

Besides Technical and Financial analysis, my golden rule is required.  

What to expect?

Recently JP Morgan and Macquarie Bank have downgraded glove stocks so that they can buy them at cheaper prices. As a result, Supermax plunged 80 sen on Monday.

It rebounded 3 sen yesterday. If it continues to go up in the next few days, I will buy Supermax aggressively. I am very confident that Supermax share price will shoot through the roof in Mid- January when it announces its 2nd quarter profit.  

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