RA (R & A Telecommunications Berhad)

Let me start by saying that my first recommendation would not be of speculative nature.
Let's take a look at R&A Telecommunications Berhad (RA).

Taking a look at RA's previous high, it is obvious there are plenty of upsides to it, from TA (Technical Analysis) point of view. If you take a closer look,

The "red" circle shows that MACD and MFI (Money Flow Index) is recovering. MFI is a better technical indicator compared to RSI in many cases, but that's a discussion for another time. So, from TA point of view, RA is a BUY.

From Fundamental Analysis (FA) perspective, it is worth noting that the company's profits have increased on an unprecedented trajectory.

Revenues 2011 versus 2010 was RM40.16mil  VS RM2.25mil
Net profit was RM8.116mil VS RM114,000 (increased over 7000%!!!!!)
So, is it a buy? I think it is. What say you?

Okay, let's not just stop at it, let us estimate the potential target price for this stock, shall we?

The total estimated market size for Telecommunications infrastructure and services in Malaysia is about RM4billion per year. If you google for recent write ups about R&A (there aren't many), they have talked about aiming for RM1billion in revenue in the next few years (25% of the market is not impossible, considering there aren't many competitors!)

The current RA net profit margin stands at about 20% of total revenues. Let's just say RA hits just RM500 million in revenues in 3 years time. And for discussion's sake, we take it that their net profit margin is 10% only. That's RM50 million in PAT (profit after tax)

Divided by 878 mil shares outstanding + 10% (of warrants) = 968 mil shares (if warrants converted)
That should bring RA's EPS (earning per share) to 5.16 cents. Apply a moderate P/E ratio of 10, should see the stock be valued at least 52 cents.

My target however, should see the stock trading at least around RM1.00

Finally, be reminded that telecommunications should see a spike in growth, and companies like DIGI, AXIATA, and MAXIS shall need to constantly upgrade their infrastructure because the industry is currently being driven by growth in data demand. Everyone's getting smartphones and the data demand is sure to surge. Invest in the company in which the products or services you use. A useful investment advice by Peter Lynch. I'm expecting RA to ride the high waves along with DIGI, AXIATA, and MAXIS. Not everyday you will come across such a chance in a lifetime! Ready to retire?

RA currently trades at 10 to 10.5 sen range.