Technical Analysis Evans Medical Plc

Proshare


Stock Summary

Recommendation: HOLD

Sector: HealthCare

Current Price: N5.06

Report Date: 06 November 2007

Entry Range: N5.06  N6.10

Stock Volatility: Low

Target Price: N6.41  N8.38

Opening Price  03/10/06: N4.49

Projected Cap. Appr.: 26.68% - 65.61%

Year High: N9.15

Time Frame: 3  6 Months

Year Low: N3.90

Trend: Positive

Close: N5.06

Price Relative: Underperformed the NSE Index

Average: N6.89

Support / Resistance: Bearish

Coefficient of Determination (R2): 0.3034

Average Daily Volume Traded: 640,976 units

 

Strategy

The secondary market has continued to experience bearish conditions, largely due to the myriad of public offerings in the market. This has seen investors selling out positions to finance public offers, thus, depressing the secondary market.

 

Evans Medical Plc recently released its unaudited half year result for the period ended 30 June 2007. This result shows that the company grew its turnover by 9.05% from N1.592 billion in 2006 to N1.736 billion. Both its profit before tax and profit after tax however recorded a drop as the PBT dropped from N217 million to N71 million representing a 67.28% drop.

 

Its PAT also dropped to N48 million from N152 million between 2006 and 2007 indicating a drop of 68.42%. The company's share price has depreciated by quite over 40% since July 2007 as this clearly shows that the stock has not been exempted from the general market pressure.

 

Comparative Analysis of Evans Medical Plc's Share Price, All-share Index and the 30 and 60-day moving averages.

 

The Evans Medical Plc stock opened in an upward trend reaching a high price of N5.15 on the 19th of October, 2006. The share price dropped to its lowest value of N3.90 on the 7th of December, 2006, due to the fact that investors continued to sell out positions in order to fund the primary offerings on offer at the time.

 

As the stock market gained massive investors patronage from the investing public in the beginning of this year, the Evans Medical Plc stock started on a strong bullish run. This led the share price to a high of N9.00 on the 8th of February.

 

The price dropped to N8.79 on the 13th of February, as profit takers cashed out. Sensing further price appreciation, investors swooped in on the stock, as this pressure led the price to a record high level of N9.15 on the 23rd of February. From the month of March 2007 to June 2007, when the company's stock witnessed some price corrections, the stock traded between N7.29 and N8.60.

 

The share price movement chart shows that the stock outperformed the all-share index for most of the period of this review. The various moving averages also remained below the share price until the second quarter in which the company recorded a drop in its profits after taxation by 68.42%.

 

The share price dropped to N7.20 on the 19th of July and then further downwards to N6.00 on the 6th August as investors continued to cash out of the stock. This is confirmed in the volume charts. The share price broke out of this resistance level to a new high price on the 16th of August to N8.50.

 

The share price has since continued on a downward trend, reaching lower prices and it is currently trading at N5.06. This downward trend is due to the various primary offerings available in the market

 

 

 Comparative analysis of Evans Medical Plc's share prices with its Relative Strength Index

 

The relative strength index shows that the Evans Medical Plc stock remained mostly within the safety band, breaking out above in the first quarter of 2007 as the stock bullish run culminated in a price of N9.15.

 

The stock returned to the safety band as the price corrected itself after investors began to take profits. Presently, the stock has dropped below the safety band.

 

Comparative analysis of Evans Medical Plc's share prices with its Momentum

 

The momentum chart shows that the stock has continued to alternate between the positive and negative regions. After reaching its 52-week high price in the first quarter of 2007, when the stock was overbought, it has remained mostly in the negative region signaling that the stock has remained oversold.

 

This trend is likely due to the prevailing bearish conditions in the market. We would therefore recommend a hold in the short term and buy in the medium to long term.

 

Disclaimer

This report has been prepared by the Investment Research Department of ZSL Stockbrokers and published on Proshare for public information and education purposes. Investors should see the content of this report as one of the factors to consider in making their investment decision. Zenith Securities Limited, Proshare Limited and its emp1loyeesand analysts accept no liability for any loss arising from the use of this information. Enquiries here should be directed to Charles Ujomu on +234-1-2782975 or analyst@proshareng.com

 

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