Monday, 15 February 2021

In Trend Genetec Defies Trend

On 9th Feb 2021, three technology related stocks released their quarterly financial results. They are Genetec, FPGroup & JFTech.

I'd say that their results were not up to the expectation of most investors.

Genetec's FY21Q3 PATAMI of RM0.89mil was a 66% and 90% drop QoQ and YoY respectively. This Q3 used to be its best quarter in previous 3 financial years.

FPGroup's FY21Q2 PATAMI of RM2mil was also not that good, but still slightly better than Genetec with a 35% & 57% drop QoQ & YoY respectively.

This quarterly profit is its lowest in the last 2.5 years.

JFTech's FY21Q2 PATAMI of RM4.0mil was a mere 0.15% improvement QoQ, even though its share price has taken a rocket ride from RM1 to over RM8 (adjusted for bonus issue) in less than one year time.

Despite a slight increase in net profit, its EPS actually dropped 1.7% QoQ due to increase in outstanding shares.

Under "normal circumstances", we would expect their share prices to be beaten down significantly until the release of next quarter result.

However, this is not the case in current tech-manic time.

JFTech's share price stayed flat the next day, climbed in subsequent 2 days to register a gain of 7.7% compared to the day of result announcement.

If we annualize its latest quarter net profit, EPS will be 1.73sen thus forward PE will be 105x at current share price of RM1.82.

Is this PE too high for JFTech? Well, as its net profit is still relatively low at around RM4 per quarter, it has every chance to double it in the future, especially when its business collaboration with Huawei bears fruits.

One of the main reason for JFTech's spectacular rise is because of its business collaboration with Huawei to develop, manufacture and supply test contactors to Huawei itself and other customers in China. 

This proposal is expected to be completed by the first quarter of FY22 (Jul22 to Sep22). JFTech will hold 55% in the initial set up.

Nevertheless, it still needs time to see profit from the partnership.

FPGroup, who is involved in the same business with JFTech, was more "normal" in which its share price dropped 14% from RM1.05 to RM0.90 in the next 2 days after result announcement. However, it was able to reduce the loss to 9.5% a day later. 

From this trend, it seems like it might easily go back to above RM1 level soon.

In its FY21Q1 (Jul21-Sep21), FPGroup acquired 55% in PLEA Sdn Bhd which is involved in provision of IoT solutions, and 70% in Sin Yen Techonologies Sdn Bhd which is involved in automation.

A new business of "automation" appeared in its financial report since FY21Q1. It registers marginal loss of RM4k with a revenue of RM2.2mil in 2 quarters.

Even though it might not contribute too much in the near future, I think it's a good diversification since automation is also something investors hotly chased after.

Genetec is a company involved in automation and it concentrates in automotive or electric vehicle segment.

After it released its lackluster result, its share price gapped down 10% at opening from RM4.39 to RM4.00 but was able to reduce the loss immediately to just 1.6% to close at RM4.32.

After another 1.5 trading days, its share price has gone up to RM5.81! This is an almost 200% increase since breaking RM2 level exactly one month ago.

In the "Prospect" part of its latest quarterly report, the management mentions that the company is believed to benefit from growing trend of Electric Vehicles (EV). This might be the reason its share price flies.

We know that its main customer of EV is from China. Investors might start to imagine and relate to certain EV companies.

Actually Genetec did mention about its involvement in EV in its earlier quarterly report but its share price did not react like this. Perhaps Elon Musk hasn't become the richest man yet at that time.

So, armed with EV trend, Genetec defies the "bad QR share price drop" trend.

Since the second half of last year, we have been talking that technology is in trend. I even wrote an article "Tech Stocks: Still Can Buy Now?" on 8th July 2020.

With this kind of title, it means that I already thought that tech stocks were expensive at that time, with PE ratio of over 30 for most of them.

I always assume that PE ratio of tech stocks should be between 15-30x. Now it seems like in special situation, it can be raised for good.

The reason I wrote that article was because I wanted to find out which tech stock was still worth to invest in during that high PE environment. 

Finally I bought JHM in the end of Jun20 and then Genetec in early Aug20.

Yes I bought Genetec!

However, I can only shake my head seeing its share price "soared high" in last 2 days, as I have sold all its shares immediately after its recent "bad" result announcement.

I think I will continue to shake my head for quite some time.


  1. Hi BD, i think it is very "logical" for u to dispose Genetec stock after the "bad" quarterly result. It's rise in past few trading days was mainly due to market's hot and crazy sentiment on EV theme. If i were u, i would have done the same thing especially Genetec has risen so much from your average purchase cost and it is a "logical" thinking to want to protect the profit.
    Talking about shaking head, i also need to do so on many tech stocks and EMS stocks i have sold last year. I owned and disposed Inari, Unisem, MPI, Penta, MI, MMSV as well as ATAIMS, VS, and Sapres too early last year. If i hold on to them till today, i would have...(shaking my head).

  2. Anyway, i always remind myself i need to constantly make buy/sell decisions in stock investment. Therefore, if i spend too much time regretting the past actions, that will impact my decision making in next actions, which may lead to more regrets. Thus, i would try my best to let the regrets go and move on for good. Let's do that together ya :)

    1. When the share price of a stock went up a lot, surely there will be a lot of people selling too early. Everyone will surely taste this the regrets of selling too early. I'm still not that matured to swallow it quickly and move on, it will take one to two weeks, haha.

  3. Fyi, i owned FPGroup and sold immediately next day after the "bad" quarterly result for a small loss. I do plan to buy back at lower price but seems like it may not go down by too much. It is one of the few tech stocks that is still selling at not-so-crazy PE multiple. Its earnings in last few quarters were really not satisfactory and the reason was not well-explained by management in quarterly report. Thus, i am not confident in its coming quarters' earnings...But, i do foresee one good quarterly result can spur its stock price to rise quickly just like most of the tech stocks, and i do not want to lose that opportunity (my greed :p)