Background

Ogawa World Bhd ('Ogawa') is involved in designing, marketing, retailing, distributing, and servicing of health care equipment and supplementary appliances. It provides a range of health and wellness equipment comprising various relaxation, therapeutic, fitness, diagnostic, and hygiene products.

Recent Financial Results

Ogawa's net profit increased by 256% q-o-q or 88% y-o-y to RM6.1 million, while turnover increased by 29% q-o-q or 14% y-o-y to RM47.7 million. The improved performance was attributable to higher sales & higher gross profit margin.


Table: Ogawa's last 8 quarterly results


Chart 1: Ogawa's last 8 quarterly results

Valuation

Ogawa (closed at RM0.44 last Friday) is now trading at a trailing PER of 6.4 times (based on last 4 qaurters' EPS of 6.9 sen). At this multiple, Ogawa is deemed fairly valued.

Technical Outlook

Ogawa is trying to break above the horizontal resistance of RM0.44. A break above that level could be the start of an upleg for this stock. Its immediate resistance is at RM0.51-52 & then at RM0.82.


Chart 2: Ogawa's weekly chart as at Aug 20, 2010 (Source: Quickcharts)

Conclusion

Based on improving financial performance & a possible upside break out above its horizontal resistance at RM0.44, Ogawa is worth tracking closely. If it succeed in breaking above the RM0.44 level with good volume, the stock could be a good trading BUY.