Road Ahead For EAH

So, EAH did very well on debut, at just below 70 sen, where can it go? One of the keys to a stock movement is to track its catalysts. One should not really look at it as an ACE stock as it is a profitable small company with traction.

Their 1Q2010 results was a good indication. Annualising its 1Q to the full year would be a 55% jump in net profits compared to 2009. Its end of July already and they should be close to announcing their 2Q2010 figures. Another strong quarter would put the company on another upward re-rating.

The company has submitted 10 tenders and some of them involve government linked firms - this could very well be another catalyst in the works. When I hinted on their banking solutions team, their pedigree makes them a notch above the crowd, and it would not surprise me if they managed to secure some major projects soon.

The sustained buying activity indicates that there are some well heeled investors in the know, who believe this is quite a different ACE company. Its a company that is going places.

If you ask me, their active RFID is miles better than the existing Touch n Go and Smart Tag readers. In terms of ease of deployment and effective cost, if Touch n Go is really keen to move to a gantry system, EA MSC's RFID solutions are right up their alley. If you are using the Smart Tag reader, you know it has a limited battery life and the reader can only capture signals provided the cars travel at a certain speed, and that there is a certain gap between the cars. EA MSC's readers are accurate and their signal capture is more efficient - you can ask them for a demo. That's why there were so many international companies wanting to represent their products at the recent EXPO on security / access at KLCC.

I have stated that the fair valuation is between 45 sen to 65 sen, obviously momentum trading and maybe some astute share accumulation is going on, and that may very well push the trading range to 70-85 sen level. Some shares may be able to sustain a premium valuation owing to the inherent product strength and upcoming catalysts.

Its unfortunate that its a small company but good fundamentals are good fundamentals. I expect EAH to continue to attract attention. Now it may be just savvy investors and connected big private investors, but whispers can drag funds to start looking into the stock as well. The fact that its a bumiputra majority owned company and a MOF approved preferred candidate only makes it more interesting.

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. The author may have bought shares in the company already. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.