Naim has a consistent ratio from year 2003 to year 2010. However, the recent 3 months cumulative result for 2011 is not so favourable as the consistency in margin had been badly affected. Therefore, the ability for the company to get out from the current non favourable situation need to be examined.
Firstly, the loans and borrowings under non current assets had increased dramatically by approximately 1524% accompanied by a decreased in current liabilities by approximately 39%. Even so, the cash and cash equivalents available are able to cover approximately 40% of the total liabilities. From that, the short term financing should not be a problem even though increase in liabilities is not preferable as it increases the debt to equity ratio greatly. Further information is required to determine the purposes of such huge non current loans and borrowings.
Secondly, the law suite facing by Naim currently might further affects Naim's situation.
Thirdly, the suddenly decrease in EPS has also created a doubted situation on the management's abilities to produce a consistent earnings for shareholder's.
However, its investment associate, Dayang, had shown a improved EPS for the recent 3 months cumulative result. This might be able to compensate Naim's non favourable situation.Furthermore, Naim is currently trading approximately 53% discount to its NAV based on the closing price on 27 Jan 2012.
Technically, MACD had shown a divergence as against price. EMA 20d crossed over EMA 50d. Volume surged as break out RM1.8 resistance but volume decrease on the next long spread bar might implies exhaustion in buying. Next resistance RM1.96. Good opportunity for buying during retrenchment. Bullish technically.
Overall, Naim would be a good bargain based on chart and fundamental value for medium term investment.
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