Dancomech starts its upward move, with more room to grow

Dancomech Holdings Bhd managed to surpass its previous high of 52 sen to close at 53 sen on June 13.

At 53 sen, the counter was trading at its 52-week high versus a low of 40 sen seen last year.

In the past year, it saw some 25.6% gain to close at 52 sen on June 14.

Technical indicators point to a further climb for Dancomech after overcoming its previous high.

The counter could rise to resistance targets of 60 sen and 68 sen.

If the share price falls to 47.5 sen, then this will be where investors should cut losses.

Fundamentally, the PCE and Measurement Instruments distributor posted a 15% year-on-year increase in its net profit to RM21 million in FY Dec 2023.

The growth momentum continued with the company reporting a 13% yoy increase in its net earnings to RM4.6 million 1QFY24.

Based on consensus estimates, Dancomech is forecasted to log higher net profit of RM23.8 million in FY24 and RM26.3 million in FY25.

In terms of valuations, this implies prospective PERs of 9.8x this year and 8.8x next year, respectively.

The company is also expected to continue registering strong 1QFY24 earnings momentum.

However, it sawa slight YoY decline of 1.9% in 1QFY24 top-line, reaching RM49.1 million.

This was due to lower revenue recorded by metal stamping business as a result of lower demand from its customers in the air-conditioning industry.

Nevertheless, the company's core PATAMI reached RM4.5 million, indicating a 4.7% YoY rise.

This uptick was somewhat mitigated by the increase in other income, such as calibration and fabrication charges, the reversal of provision for expected credit losses, and interest income.

The company remains committed to intensifying its sales initiatives while proactively managing potential challenges arising from lower-than-projected external demand, heightened geopolitical tensions, and significant domestic commodity production declines.

Additionally, it will persist in its strategic pursuit of identifying and evaluating opportunities for acquisitions and collaborations aimed at boosting profitability.

Whatever said, investors probably like Dancomech for its resilient outlook, translating to more upside for the stock.