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This article first appeared in The Edge Financial Daily on December 11, 2017

Stock With Momentum: SWS Capital Bhd (-ve)

SHARES in SWS Capital Bhd (fundamental: 0.8/3, valuation: 0.5/3), which hit a six-month high of RM1.33 last Wednesday, triggered our momentum algorithm last Friday for the third time last week, and eighth time this year.

The stock rose two sen or 1.55% to close at RM1.31 yesterday, giving the group a market capitalisation of RM191.1 million. It saw 1.18 million shares traded, compared with its 200-day average of 128,279.5 shares.

SWS Capital, which is principally involved in the manufacturing and sale of office and kitchen furniture, plywood, small hardware and related products, and lamination operations, booked a net profit of RM6.81 million in the third quarter ended Aug 31, 2017 (3QFY17).

Comparatively, it recorded a net loss of RM5.19 million a year ago. The group’s return to the black was due to the negative goodwill recognised on its acquisition of Ee-Lian Enterprise (M) Sdn Bhd for RM36.14 million, which was completed in July.

Revenue for the quarter however fell 5.9% to RM31.96 million from RM33.98 million in the previous year’s corresponding quarter.

The group also manufactures settes, sofas, air staples and nails as well as invests in properties.

SWS was last traded at 22 times its earnings and has a price-to-book ratio of 1.88 times.

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