CSL: At Strong Support

CSL share price attempted to launch a comeback yesterday, but failed, temporarily.

The China-based stationery maker has its IPO under-subscribed by 50% back in Feb this year at 90sen per share. However, it made its debut brightly when its share price shot up to RM1.40 in the first 3 trading days. This translates into a 55% gain from its IPO price. After retreating to RM1.00, it surged again to touch RM1.90.

Currently it is again close to RM1 level, which should be a strong support technically. Will CSL try to rebound again next week? The chance is there.

      CSL: can it make a U-turn?

CSL recently announced a proposed bonus issue of warrants, with one warrant for every 2 existing ordinary CSL shares. This will increase the total shares 50% to 1,788,886,164 shares when all warrants are exercised. 

Financially, like most other China-based stocks listed here, CSL is considered good. It registers decent growth in revenue and net profit since year 2007, and seems to continue this trend in 2012 base on its strong 2012Q1 result.

RM mil	2007	2008	2009	2010	2011
Revenue	233	413	556	670	837
Net Profit	97	126	169	189	219

RM mil	2012Q1	2011Q1
Revenue	240	184
Net Profit	62	52

From my calculation, its EPS for FY2011 stands at 18.4sen, which gives a PE ratio of 5.6 now at RM1.03 per share, which is attractively low like other China stocks here. However, after the bonus issue of warrants, this figures will change.

In its prospectus, CSL proposed to give out at least 20% of net profit for dividend for FY2012, which is not very attractive.

China stocks are notorious for accounting fraud, do you think it's worth to invest? For short term, perhaps it is worth a try.