Technical Analysis of Sha Sha Denims on 27 Jan 2017

Technical Analysis of Sha Sha Denims on 27 Jan 2017

This is no buy/sell recommendation - just a trial to see if Technical Analysis (works to an extent) in Dhaka Stock Exchange.

I am not that good at Fundamental Analysis. But with my limited understanding of Fundamentals, I think Sha Sha Denims is one of the best fundamental companies in Bangladesh.

The market also knew that it was undervalued at 34 - but for weeks nothing happened. Then suddenly, it made a Big Bull run that broke all barriers and exceeded all expectations. One such trade a year is sufficient.

There was a rumor of some power plant project of one if its subsidiaries that might have fueled this bull run. But I think there is more to it.

The expansion from IPO fund is yet to be fully reflected in Shasha's Earnings. Once it starts reporting higher profits and EPS, I think it will keep on moving higher.

These are some highlights from its 2015 Annual report - strangely, 2016 Annual Report is mainly numbers-based with hardly any statements from top management!

Some Highlights from 2015 Annual Report:

• We have earned an amount of Tk. 122.46 million as interest income from un-utilized IPO fund which is deposited at different banks as FDR.
• Consolidated EPS of SDL and its subsidiaries stood at Tk. 5.07 for the year 2015 compared to Tk. 1.59 (restated) for 2014.
• SDL is still in its expansion phase. Construction of fourstoried utility and store building is ongoing. It is expected that two out three four-storied buildings will be completed by June 2016.
• We have already imported dyeing machine and warping machines. On the other hand some LCs were opened to import machineries as mentioned in the prospectus. At the last AGM it was declared that expansion of factory would be completed by September 2016 but due to changes of the design of factory building the delay has occurred.
• Profit after Tax of Energis Power Corporation Ltd. is Tk. 87.93 million.
• Profit after Tax of Shasha Garments Ltd. was Tk. 13.53 million in 2015 Compared to Tk. 34.45 million in 2014.
• We expect that the expansion will be completed by September 2017 and will lead to further increases in revenue and profit.
• SDL is going to establish a new plant in the DEPZ extension area with the latest and cutting -edge technology which will lead to a 30% increase in revenue annually. It is estimated that the cost of the new plant would be about Tk. 175 crore.

It seems a rosy picture till date.
Hefty profit, good EPS and Cash Flow . . .

	2014	2015	2016
Profit	175	572	580
EPS	1.79	5.07	5.14
Dividend	20%C + 15%B	25%C	12.5%C (I)
NOCFPS	4	5

What I mostly like about it is its Cash Dividends - a textile company that has been able to give at least 20% Cash in last two years - including Interim Dividends - has enough solvency to ride through hard times.

Now moving on to the Technicals. Even I could not foresee such a High Price for Shasha. When the herd mentality takes over, the bull becomes uncontrollable.

However, stocks sort of moves like waves, so Shasha might be generous enough to come to a lower price where entry could be safe for the next run. As I failed to estimate the High, I will not risk estimating the low it might turn back from.

The retracement scenario is given below in the chart. To me 55 looks an attractive entry level . . . But it is your call . . . 

I let the market decide and then follow . . .