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Wednesday, October 01, 2014

Market Outlook as at September 30, 2014

Over the past 3-4 weeks, our market has dropped to the long-term uptrend line. From Chart 1, we can see that the support of that uptrend line is at 1850. We had broken below that line and we need to recover above it quickly.

Despite recent weakness among 2nd & 3rd liner stocks, FBMFLG, FBMSCAP & FBMACE are still in an uptrend line.


 Chart 1: FBMKLCI's weekly chart as at Sep 30, 2014 (Source: BTX)

The decline in our market mirrors similar drop in oversea markets. With the exception of DAX, most market indices are still in a long-term uptrend.


 Chart 2: STI's weekly chart as at Sep 30, 2014 (Source: Stockcharts)


 Chart 3: HSI's weekly chart as at Sep 30, 2014 (Source: Stockcharts)


 Chart 4: CAC's weekly chart as at Sep 30, 2014 (Source: Stockcharts)


 Chart 5: FTSEs weekly chart as at Sep 30, 2014 (Source: Stockcharts)


 Chart 6: NASDAQ's weekly chart as at Sep 30, 2014 (Source: Stockcharts)


 Chart 7: S&P500's weekly chart as at Sep 30, 2014 (Source: Stockcharts)


 Chart 8: DAX's weekly chart as at Sep 30, 2014 (Source: Stockcharts)

Despite the poor market sentiment, the technical outlook is still cautiously bullish. The decline in share prices should be viewed as a correction unless the uptrend lines are violated. Having said that, we should always exercise caution since this rally is already 5 years old. There are many investors sitting on large handsome gain and they would hesitate to sell to capture their profit.

VS: Top-line & bottom-line continue to rise

Result Update

For QE31/7/2013, VS's net profit increased more than 8-fold q-o-q but rose less than 1% y-o-y to RM36 million while revenue was up 42% q-o-q or 49% y-o-y to RM534 million. Pre-tax profit was mixed; up more than 4-fold q-o-q but down 45% y-o-y to RM21 million. Pre-tax profit jumped q-o-q mainly attributable to higher sales generated by the Malaysian operations compared to the preceding quarter coupled with improved gross profit margin resulting from improved sales mix for the Malaysian operations. For QE31/7/2014, VS's net profit was given a bump up from tax credit due to the recognition of tax incentive in relation to the enhanced export incentive.


Table 2: VS's last 8 quarterly results


Chart 1: VS's last 38 quarterly results

Valuation

VS (closed at RM2.59 yesterday) is trading at a trailing PE of 8.9 times (based on last 4 quarters' EPS of 29 sen). At this multiple, VS is deemed relatively attractive.

Technical Outlook

VS is a strong uptrend. This exponential rise -not unlike what was witnessed in 2006/2007- might just happen again, with a test of the 2007 high of RM3.30. However, it must be noted that a stock that rose sharply would be prone to sharp correction too.


Chart 2: VS's weekly chart as at Sep 30, 2014 (Source: Tradesignum)


Chart 3: VS's monthly chart as at Sep 30, 2014 (Source: Equities Tracker)

Conclusion

Based good financial performance, fairly attractive valuation and bullish technical outlook, VS is a good stock for medium-term investment (by buying on weakness).

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, VS.

Monday, September 29, 2014

Yinson: High valuation calls for high earning...

Results Update

For QE31/7/2014, Yinson's net profit increased by 2% q-o-q or 200% y-o-y to RM31 million while revenue was mixed- down 5% q-o-q but rose 23% y-o-y to RM281 million. The bottom-line improved by RM0.4 million q-o-q due to better segmental results (albeit lower revenue) and lower finance costs, which more than offset higher tax charge and lower share of results from associate and JVs. When compared to the same quarter last year, Yinson's bottom-line improved by RM20 million due to higher segmental results of RM20 million (of which RM16 million was contributed by the Marine division) and higher share of results from associate and JVs, which more than offset the increase in finance costs and tax charges.


Table 1: Yinson's last 8 quarterly results


Chart 1: Yinson's last 28 quarterly results 

Valuation

Yinson (RM3.38 last Friday) is now trading at a trailing PE of 30.4 times (based on last 4 quarters' EPS of 11.07 sen). At this multiple, Yinson is deemed fully valued.

Technical Outlook

Yinson is in an uptrend, with support at RM3.00 (using the 20-week SMA line as a proxy for uptrend line).


Chart 2: Yinson's weekly chart as at Sep 26, 20114 (Source: Tadesignum)

Conclusion

Despite good financial performance & positive technical outlook, it is not easy to make a case to buy Yinson due to its high valuation. For now, I would rate it a HOLD.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of,Yinson.

Thursday, September 25, 2014

Haio: Tough times ahead

Results Update

For QE31/7/2014, Haio's net profit dropped by 42% q-o-q or 29% y-o-y to RM6.2 million while revenue dropped by 19% q-o-q or 9% y-o-y to RM50 million. Revenue dropped q-o-q due to drop in revenue for all three divisions: MLM, Wholesale & Retail. The drop in MLM & Retail divisions was attributed to last quarter's higher sales which coincided with incentive trip promotion.Wholesale division's revenue dropped due to more cautious consumer spending. The decreased revenue led to lower Net Profit.

The explanation for the drop in revenue would have been acceptable except that the revenue of the immediate preceding quarter was also lower q-o-q. So what we have is a string of lower revenue - never a good thing - and declining profit which was brought on by declining sales and declining profit margin. Haio's prospect in the near term looks rather negative.


Table: Haio's last 8 quarterly results


Chart 1: Haio's last 38 quarterly results

Valuation

Haio (at RM2.70 yesterday) is now trading at a trailing PE of 14 times (based on last 4 quarters' EPS of 19 sen. At this PE, Haio is deemed fairly valued.

Techncial Outlook

Haio is in an upward channel, with support at RM2.45 & resistance at RM3.00.


Chart 2: Haio's weekly chart as at Sep 24, 2014 (Source: Tradesignum)

Conclusion

Based on poorer financial performance & full valuation, I would revise Haio's rating to a TAKE PROFIT.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Haio.

Scientx: Bottom-line and top-line improved

Result Update

For QE31/7/2014, Scientx's net profit increased by 34% q-o-q or 61% y-o-y to RM48.8 million while its revenue was mixed, dropped by 3% q-o-q or 12% y-o-y to RM415 million. The improved bottom-line on a q-o-q basis was attributable to higher operating profit from both the consumer packaging products and property development divisions. However, consumer packaging products division's revenue dropped 6% q-o-q.


Table 1: Scientex's last 8 quarterly results


Table 2: Scientex's segmental results


Chart 1: Scientex's last 36 quarterly results

Valuation

Scientex (at RM6.95 yesterday) is now trading at a trailing PE of 10.4 times (based on last 4 quarters' EPS of 67 sen). With strong growth of 32% last 4 quarters - and likely to continue in the next 3 years - Scientx is an attractive growth stock with PEG ratio is about 0.3 time only.

Technical Outlook

The stock is in an uptrend.The uptrend continues after the share price broke above the horizontal resistance at RM6.00-6.10 in August.


Chart 2: Scientex's weekly chart as at Sep 24, 2014 (Source: Tradesignum)

Conclusion

Based on good financial performance, attractive valuation & positive technical outlook, Scientex remains a good stock for medium to long-term investment.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Scientex.

Tuesday, September 23, 2014

Dealing with Losses

In Business Insider, there was a recent interesting article entitled 3 Lessons that Investor Learned After Losing His Job, Reputation and USD1.6 million. It is a story about a poor Kentucky boy, Jim Paul who made it all the way to the top- he served on the Board of Governors of the Chicago Mercantile Exchange- and lost it all. If the story ended there, it would have been just tragic. But, he is in America and there, they are used to heroes (don't we all?). Paul then started all over again and slowly rose back up. Today, he is a manager of a team in the investment advisory firm, Brendan Moynihan. Together with the boss, Moynihan, Paul wrote a book about his experience entitled "What I learned Losing a Million Dollar?" If you have the time, read it. If you don't have the time, read this article.

I like to highlight Point #3 of the article; Emotional decision-making is dangerous when it's done in a group. Many people are investing these days through the sharing of information in a group. You have people joining forums, what's app groups and investment study groups to learn about what's good to buy today. With very few exceptions, investment decision-making in a group should be avoided at all cost. The pitfalls include front-running, rumor-driven tradings, egoistic tradings and over-tradings. Investment decision-making is best done away from the maddening crowd, whether real or virtual.

Alas, we have seen many stocks going up these days just because they were mentioned in the press or surfaced in the rumor mills. This is only possible when the market is made up of many inexperienced players and too much money floating around. These newbies would pound on any bit of information or rumor to get into a trade. If they don't wise up quickly, they will suffer, like lambs to the slaughter.

Nonetheless, there are still some good stocks for investing purpose. Take the time to read the lengthy research reports and do your homework. Always, aim for a decent return of about 15-20%. If someone promise you an investment that could double your money, you better walk away quickly. In investment, our enemies are always greed and fear.

Monday, September 22, 2014

EForce: Looking toppish

Result Update

For QE30/6/2014, EForce's net profit dropped by 8% q-o-q but rose 60% y-o-y to RM2.0 million while revenue was unchanged q-o-q but rose32% y-o-y to RM3.7 million. Net profit dropped q-o-q due to higher operating expenditure and lower interest income.


Table 1: EForce's last 8 quarterly results


Chart 1: EForce's last 26 quarterly results 

Valuation

EForce (closed at RM0.73 last Friday) is now trading at a PE of 20 times (based on last 4 quarters' EPS of 3.49 sen). EForce's high PE maybe just justified by its high growth in the past 4 quarters of 42%- which gives to a PE/G ratio of 0.5 times. However, the company's business is correlated to the state of the financial markets and this growth may recede in the event of a market downturn. Thus, I would not out too much emphasis on growth as the business is fairly cyclical. EForce could well be seeing its peak earnings right now.

Technical outlook

EForce has recently tested its uptrend line and rebounded (see Chart 2). If you look at the monthly chart (Chart 3), you will see that EForce is at a tipping point. Any further decline would lead to a reversal in the trend, from uptrend to downtrend.


Chart 2: EForce's weekly chart as at Sep 19, 2014 (Source: Tradesignum)


Chart 3: EForce's monthly chart as at Sep 19, 2014 (Source: Equities Tracker)

Conclusion

Based on technical consideration, EForce is rated a SELL INTO STRENGTH.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, EForce.

Astro: Top-line and bottom-line improved

Results Update

For QE31/7/2014, Astro's net profit increased by 7% q-o-q or 39% y-o-y to RM138 million while revenue increased by 8% y-o-y or 14% y-o-y to RM1.35 billion.

The increased revenue q-o-q due to an increase in subscription, advertising and other revenue RM29.9 million, RM45.2 million and RM20.1 million respectively. Net profit increased q-o-q due to an increase in EBITDA of RM21.0 million and lower depreciation of set-top boxes of RM4.5 million. The increase was partially offset by higher tax expenses of RM20.3 million.


Table: Astro's last 8 quarterly results


Chart 1: Astro's last 12 quarterly results

Valuation

Astro (closed at RM3.38 last Friday) is now trading at a trailing PE of 35 times (based on last 4 quarters' EPS of 9.6 sen). At this PE, Astro is over-valued. This high valuation cannot be justified by its tepid growth as reflected by PE/G ratio of 1.8 times.

Technical Outlook

Ashas broken below its intermediate uptrend line, S1-S1 at RM3.40 in June. Nevertheless, it is still in a long-term uptrend line, SS with the support at RM3.05-3.10.


Chart 2: Astro's daily chart as at Sep 19, 2014 (Source: Tradesignum)

Conclusion

Astro is a good stock for long-term investment. Due to high valuation, Astro is to be avoided. Its current rating as SELL INTO STRENGTH is wishful thinking. However, if it drops to RM3.10, it could be a good trading buy.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Astro.

Friday, September 19, 2014

MPHBCap: Poised for take-off

MPHBCap broke above its horizontal line at RM2.65 in late afternoon.With this breakout, MPHBCap may continue with its prior uptrend.

Based on technical breakout, MPHBCap is now a good trading BUY.


Chart: MPHBCap's daily chart as at Sep 19, 2014 (Source: Interachart)

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, MPHBCap.

AEONCR: Bottom-line dropped q-o-q

Result Update

For QE20/8/2014, AEONCR's net profit dropped 16% q-o-q but rose 10% y-o-y to RM47 million while revenue increased by 4% q-o-q or 29% y-o-y to RM209 million.

Bottom-line was lower compared to last year due to increased non-performing loans (NPL) ratio of 2.65% (compared to 1.64% last year); higher ratio of total operating expenses against revenue of 59.6% (compared to 55.9% in last year) and higher average funding cost (though no number was given). On the other hand, other incomes rose due to increase in bad debts recovered and AEON Big loyalty programme processing fee. AEONCR’s effective tax rate was higher than the statutory tax rate as certain expenses are not deductible for tax purpose.


Table: Aeoncr's last 8 quarterly results

The jump in operating expenses was fairly substantial, with the ratio of total operating expenses against revenue increased by 3.7 ppts. It caused a bottom-line to hook down in the first graph in the chart below. In the third graph, we can the rate of change for top-line has been declining over the past 3 quarters while the rate of change for profitability has been decreasing steadily for the past 3 years. We could be seeing the tip point for the out-performance in AEONCR, with the capitulation coming in the next few quarters.


Chart 1: Aeoncr's last 29 quarterly results

Valuation

AEONCR (closed at RM16.48 yesterday) is now trading at a PE of 12.2 times (based on last 4 quarters' EPS of 135 sen). At this PE, AEONCR is deemed fairly priced.

Technical Outlook

AEONCR is still in a long-term uptrend line. However, the MACD indicator has hooked down and this may signal a decline in share price in the near term.


Chart 2: Aeoncr's weekly chart as at Sep 19, 2014 (Source: Tradesignum)

 
Chart 3: Aeoncr's monthly chart as at Sep 19, 2014 (Source: Equities Tracker)

Conclusion

Based on good financial performance & attractive valuation, AEONCR is still a good stock for long-term investment. However, the technical outlook shows weakness ahead.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, AEONCR.

KESM: Bottom-line jumped!

Results Update

For QE31/7/2014, KESM's pre-tax profit increased by 391% q-o-q or 61% y-o-y to RM6.7 million while revenue increased by 16% q-o-q or 7% y-o-y to RM69 million. Bottom-line increased due to higher revenue, which is in turn due to higher demand for burn-in and testing services.


Table: KESM's last 8 quarterly results


Chart 1: KESM's last 39 quarterly results 

Valuation

KESM(closed at RM2.85 yesterday) is now trading at a PE of 11.3 times (based on last 4 quarters' EPS of 25.3 sen). At this PE, KESM is deemed fairly valued.

Technical Outlook

KESM's share price is in an uptrend line, well supported by the 20-week EMA line at RM2.75-2.80 (see Chart 2). The sharp rise in KESM's share price in the past 8 months followed the breakout of the long-term downtrend line at RM2.00 in early 2014 (see Chart 3).


Chart 2: KESM's weekly chart as at Sept 19, 2014 (Source: Tradesignum)


Chart 2: KESM's monthly chart as at Sept 19, 2014 (Source: Equities Tracker)
 
Conclusion
Based on good financial performance, reasonable valuation & positive technical outlook, KESM remains a good stock for long-term investment.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, KESM.

Thursday, September 18, 2014

All Money Is Not The Same!

Once in a while, you would read the title of an article and you would just give the article a miss. That's what I did when I came across an article entitled Red Chips not putting much stock in their own cash? which appeared in the Edge newsletter last weekend. This is not the first time that the Edge discussed this subject and I dare say that it would not be the last time either. The article did serve an important function of informing investors to be cautious when investing in Red Chips by raising a very valid question: Why are the Red Chips treating their cash holding as if it is not there?


Table: Cash Balance held by Malaysia-listed China stocks (Source: The Edge)

If you look at their accounts, these companies have fair substantial cash holding (see the table above). Now, we cannot blame the investors for choosing to completely ignore this 'fact'. The simple truth of the matter is the bosses also chose to ignore this fact. These companies would apply to carry out Rights Issues in order to raise fund to finance their expansion despite having a few hundred of million RMB in their bank accounts. The bosses could easily privatize their companies via selective capital repayment (by tapping on the cash alone) and end up owning their entire companies or the businesses for 'free' and yet they would choose not to do so.

The Cantonese have a saying that goes like this: Where can you find a frog hopping on the street (and everyone ignores it)? There could only be one answer to that riddle: the frog may not be a frog. Stories of the disappearing cash hordes, such as this one, do not instill confidence in investors.

So, instead of lamenting and complaining about the Malaysian market or investors not knowing how to value their companies, the bosses should use the money in their bank accounts and carrying out aggressive share buyback. As the saying goes, the proof is in the pudding! 

Until then, investors will be wise to treat all Red Chips like the former Soviet Union: A riddle wrapped up in an enigma.