China XLX: Trading within a Falling Wedge

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China XLX is currently trading within a Falling Wedge.  Base on chart pattern, current price is closed to wedge resistance. Unless there is a breakout, the price will probably drop in the next one to two months. However, current China XLX PE is about 20 which is over value and also much higher than average PE of 8 in 2007 and 2008. This high PE presents a very unlikely scenario of breaking out from the falling wedge and start a bullish trend.

Fundamentally base on financial report, this company not really fantastic. The following financial ratio is nothing to be proud about.

Base on FY2009 Financial Result:

  • Net Profit Margin = 5.1%
  • ROA = 4%
  • ROE =  8%
  • Current Ratio = 1.04
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Armstrong: Moving Sideway

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Armstrong is currently trading  almost as the historical high with PE=15 which is fair value compared to past 3 years average of 16.2. There is no catalyst to move the stock price higher unless there is earning surprises or some big good news of this company.

Fundamentally the company is OK base on FY2009 Financial Report:

  • Net Profit Margin = 8%
  • ROA = 9.4%
  • ROE = 15%
  • Current Ratio = 2.3

Armstrong will probably be trading in a sideway from both technical and fundamental perspective.

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Raffles Education: Is it Really Bottoming Up?

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Technically base on chart pattern RafflesEducation is finding a bottom at $0.28. If (and a BIG IF) RafflesEducation can turn around in the next few quarters and improve the financial performance, this price level is very attractive.

However current financial performance of Raffles Education is getting WORSE quarter over quarter. The Net Operating cash flow turns from bad to worse for the past 3 quarters (From $48 million in Sept 2009 to $580k to NEGATIVE $6.7 Million in Mar 2010).

ROA degraded from 16 to 10 to 4.
ROE degraded from 30 to 26 to 10.
Current Ratio is 0.9 shows that the company has liquidity problem (not surprising because in Mar 2010 quarter, the company burned $6.7 million cash per quarter)

The company performance has been really bad for the past one year. Not the right time to make any entry now until the Raffles Education publishs the latest financial performance. Need to see whether there is any improvement quarter over quarter.

If the financial result is bad, the stock price may go even lower than $0.28!

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