UKCM's share price has fallen to the same level seen in 2008 and 2020 before a sharp bounce higher. RSI is almost 'oversold' on the monthly. Could history repeat itself?

Overview

UKCM is a British investment trust which focuses on buying UK commercial properties. The business, which was established in 2006, is a part of the FTSE 250 Index and London is where the company's headquarters are.

Financials

Taking a look at the company’s income statement for 2021 versus 2020. Total revenue in 2021 rose £266m from £21 in 2020, which is more than a 900% increase year on year. Net profit after tax and expenses came in at £236m compared to a loss of £10.2m in the previous year, as a result, the earnings per share were reported at 18.18p. Over to the balance sheet, cash and cash equivalents did fall by around £80, however, overall the value of net assets grew to £1.32bn from £1.12bn.

Technicals

From a technical overview, the stock is currently trading at around 50p a share. We can see that there has been a huge sell-off since May last year and the current economic crisis around the UK and the world in general, has only added additional pressure on the company’s stock. However, looking at the history of the chart on the monthly timeframe, on two other separate occasions the price has fallen into similar territory which was followed by a huge bounce higher. Once in December 2008 after the financial crisis at that time and the second time during the start of Covid in 2020. On both occasions, the RSI (technical indicator) has fallen into ‘oversold’ territory and we can see it is heading this way now. Therefore, potentially creating a buy opportunity for the longer term. The key support sits along the trendline at 48 followed by 47 which is just below it. If history is to repeat itself, the price outlook would range between 70-80p in the next 12 months.    

Summary

To summarise, the financials certainly demonstrate improvement year-on-year with impressive growth and profitability. The company’s operations are now on the positive side with a good balance among their finances, referring to the ratio of assets to liabilities. The technicals suggest a fair bullish opportunity regarding risk to reward and a bounce higher should be considered. Although, the MACD on the monthly timeframe remains strongly negative. A sign of the volume (histogram) lowering, and the MACD and signal line turning neutral would reduce the risk. Potentially consolidating and creating a much better opportunity.