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Friday, July 22, 2016

Gadang: Earnings Continues to Grow

Background

Gadang Holdings Bhd ('Gadang') is involved in 3 main businesses: construction, property development and utility. The contribution by each division is outlined below:


Diagram: Gadang's segmental revenue & profit contribution for FY2015 & FY2016

Historical Financial Performance

Gadang's top-line and bottom-line grew strongly in the past 5 years.


Chart 1: Gadang's P&L for last 10 years

We can see that the growth came mainly from the construction and property development segments.


Chart 2: Gadang's segmental revenue & profit contribution for last 5 years

Recent Financial Results

For QE31/5/2016, Gadang's net profit increased by 21% q-o-q or 24% y-o-y to RM30.5 million while revenue grew by 41% q-o-q or 46% y-o-y to 249 million. Revenue increased q-o-q mainly due to higher progress billings for work done from on-going construction and property development activities. The higher revenue led to higher profits.


Table: Gadang's last 8 quarters' P&L


Chart 3: Gadang's last 10 quarters' P&L

Financial Position

Gadang's financial position as at 31/5/2016 is mixed. Its current ratio is adequate at 2.7x (or at 1.4x excluding property under development) while total liabilities to equity stood at 1.3x. The elevated gearing position is a concern which the company is addressing by raising funds by privately placing out 10% of its share capital (or 23.511 million shares) in April this year. Howevr, it may have to do more capital raising exercise as the gearing ratio is still elevated as at 31/5/2016.

Valuation

Gadang (closed at RM2.48 today) is now trading at a trailing PER of 6.8x (based on last 4 quarters' EPS of 36.42 sen). At this PER, Gadang is deemed fairly attractive.

Technical Outlook

Gadang broke above its long-term downtrend line, RR at RM0.90 in 2013. Its immediate resistance will come from the horizontal line at RM2.50-2.60.


Chart 4: Gadang's monthly chart as at July 22, 2016 (Source: Shareinvestor.com)

Another angle to look at the rise in Gadang;s share price is to draw an irregular upward channel on the price chart. The share price will soon be testing the upper line at RM2.50.


Chart 5: Gadang's monthly chart as at July 22, 2016 (Source: Shareinvestor.com)

Finally, a good way to see the potential of this stock is to place the price chart next to its profit trend. If Gadang can maintain its strong profit growth, its price rally may continue.


Chart 5: Gadang's monthly chart for past 10 years compared to its bottom-lines 

Conclusion

Based on good financial performance, reasonable valuation & positive technical outlook, Gadang could be 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, Gadang.

Tuesday, July 19, 2016

HEIM: Earnings Continued to Rise

Results Update

Heineken Malaysia Bhd ('HEIM') has just announced its results for QE30/6/2016. Its net profit increased by 20% q-o-q or 38% y-o-y to RM60.9 million while turnover was unchanged q-o-q but rose 16% q-o-q to RM460 million. HEIM's PBt rose 16% q-o-q due to different timing of branding building & promotional activities.


Table: HEIM's last 8 quarterly results

From Chart 1 below, we can see that HEIM's top-line has been growing steadily. In the last 2 years, bottom-line has finally inched higher- brought on by higher profit margins.


Chart 1: HEIM's last 43 quarterly results

Valuation

HEIM (closed at RM16.92 yesterday) is now trading at a trailing PER of 19.2 times (based on last 4 quarters' EPS of 87.94 sen). Its dividend yield is fairly reasonable at 5.0%. Based on last year's earnings growth of about 24%, PEG ratio can be computed to be 0.8 x. All these multiples show that HEIM is still fairly attractive.

Technical Outlook

HEIM has broken above its triangle at RM14.50-15.00. The first projected target is RM17.00-17.50.


Chart 2: HEIM's weekly chart as at July 18, 2016 (Source: Shareinvestor.com)

If foreign funds are hungry enough to pay for decent yield, HEIM may retest its 2013 high of RM22.00.


Chart 3: HEIM's monthly chart as at July 18, 2016 (Source: Shareinvestor.com)

Conclusion

Based on good financial performance, fairly attractive valuation & bullish technical outlook, HEIM could be a good stock for your investment portfolio.

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.

KESM: At the January High Aagin!

On mid-June, I posted on KESM where I maintain my rating for the stock as a SELL ON STRENGTH based on anticipated normalization of earnings. For more, go here.

The stock has rallied in the past 4 weeks from RM4.10 to RM5.95 yesterday. This is the high recorded in January this year. In line with my recommendation, you may consider taking profit progressively on this stock from here now. 


Chart 1: KESM's weekly chart as at Jun 18, 2016 (Source: ShareInvestor.com)

There is a good possibility that the share price may charge thru the RM5.95-6.00 level. from the daily chart, we can see that the MACD has crossed above the MACD signal line. In the past, this positive technical sign had shown up after a big push and the momentum could well carry the stock for another 3-5% higher before correction set in. 


Chart 2: KESM's daily chart as at Jun 18, 2016 (Source: ShareInvestor.com)

Of course the big question is where is the Peak, not the temporary peak! From the monthly chart, we can see that the last Peak was a sharp spike-up to RM6.30. If we can hit this mark again, it would have been a great investment- making a tidy profit of 250% since September 2013!


Chart 3: KESM's monthly chart as at Jun 18, 2016 (Source: ShareInvestor.com)

Conclusion

Based on anticipated poorer financial performance, I would maintain my rating for KESM as a SELL ON 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, KESM.

Monday, July 18, 2016

Market Outlook as at July 18, 2016

I will give a quick tour of the market outlook globally.

1) US markets

DJIA & S&P500 have broken above their downtrend lines while Nasdaq is poised to do the same. Despite the bullish breakout for DJIA & S&P500, the volume did not expand. ADX is still at the low- indicating lack of momentum.


Chart 1: DJIA, S&P500 & Nasdaq's weekly chart as at July 15, 2016 (Source: Stockcharts.com)

2) Europe

CAC & DAX are in a downtrend while FTSE has broken above the downtrend!! Is the breakout due to foreign buying as a result of a sharp drop in sterling pound?


Chart 2: CAC, DAX & FTSE's weekly chart as at July 15, 2016 (Source: Stockcharts.com)

3) BRIC (excluding Russia)

While SSEC is still languishing near the low, BSE and Bovespa had broken above their downtrend lines.


Chart 3: SSEC, BSE & BVSP's weekly chart as at July 15, 2016 (Source: Stockcharts.com)

4) Singapore, Hong Kong & South Korea

These Asian tigers have broken above their downtrend lines and are now moving sideways.


Chart 4: STI, KOSPI & HSI's weekly chart as at July 15, 2016 (Source: Stockcharts.com)

5) Developing ASEAN countries

Thailand, Indonesia & the Filipino stock market indices have all broken above their recent downtrend lines.


Chart 5: SETI, JKSE & PCOMP's weekly chart as at July 15, 2016 (Source: Stockcharts.com, Yahoo Finance & Bloomberg)

Why are the Thai, Indonesian & the Philippines stock markets doing so well? Why is FTSE bucking the downtrend in Europe? Why are BSE & Bovespa breaking above their downtrend lines while SSEC is still languishing? The answer could be weaker currencies. The maximum drop are: THB (down 28%), PHP (down 18%), IDR (down 60%), GBP (down 34%, not the recent Brexit-inspired plough), INR (down 58%) & BRL (down 110%).

There is one more currency which took a heavy beating: MYR which dropped as much as 46%! Based on preceding examples, one can only ask the pertinent question: Where is our bullish breakout of our downtrend?? This is the case of the dog-that-didn't-bark-in-the-night-time!

I believe that the recent BNM's OPR reduction of 0.25% to 3.0% could start the ball rolling. A much upside move in our market is very much in order. For those who are still not convinced, you may opt to buy some beaten down income stocks, such as Magnum & BJToto. If the recovery does not materialize, you would at least have an income higher than the FD rates!

 
Chart 6: FBMKLCI, FBM70 & FMT100's weekly chart as at July 15, 2016 (Source: Shareinvestor.com)

Wednesday, July 13, 2016

BNM Reduced OPR to 3%


Bank Negara Malaysia has just reduced the Overnight Policy Rate (OPR) to 3% at its Monetary Policy Committee (MPC) meeting (here). The Property stocks are up as shown by the jump in the Properties Index below.


Chart: Properties Index's 30-min chart as at July 13, 2016_3.40pm (Source: Shareinvestor.com)

The broad market should respond according to this positive monetary move.

BAT, DIGI & Genting: Breakout?

A few stocks rallied to their downtrend lines. Let's take a look at 3 in particular.

1) BAT

I doubt it can break above the intermediate downtrend line at RM55.00. It may consolidate at RM52.00-53.00.


Chart 1: BAT's weekly chart as at July 13, 2016_11.00am (Source: Shareinvestor.com)

2. DIGI

DIGI managed to break above the intermediate downtrend line at RM4.80. It may test the RM5.00 and consolidate between RM4.80-5.00. If it managed to break above RM5.00, it may consolidate above the RM5.00.


Chart 2: DIGI's weekly chart as at July 13, 2016_11.00am (Source: Shareinvestor.com) 

3. Genting

Genting broke above its downtrend line at RM8.10 on Monday. This morning, it broke above the horizontal line at RM8.20. It may have a chance to test its next resistance from the horizontal line at RM8.60.


Chart 3: Genting's weekly chart as at July 13, 2016_11.00am (Source: Shareinvestor.com) 

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, BAT, DIGI & Genting. 

Tuesday, July 12, 2016

DIGI: Earnings Recovering

Result Update

For QE30/6/2016, Digi's net profit rose 5% q-o-q but dropped 9% y-o-y to RM421 million while revenue was unchanged q-o-q but down 4% y-o-y to RM1.655 billion. Revenue dropped marginally y-o-y due to intense competition. PBT improved q-o-q due to lower depreciation in current quarter as compared to accelerated depreciation booked in the last 2 quarters.


Table: Digi's last 8 quarterly results

We can see that profits and profit margins are starting to recover!


Chart 1: Digi's last 35 quarterly results

Valuation

Digi (closed at RM4.75 yesterday) is now trading at a trailing PE of 23 times (based on last 4 quarters' EPS of 20.56 sen). In the absence of earnings growth, DIGI's high PER is hard to justify. The only consolation is its decent dividend yield of 4.3%.

Technical Outlook

DIGI is in an intermediate downtrend line, RR since it peaked at RM6.50 in February 2015. The resistance from the downtrend line is at RM4.80. Until it can break above this mark, DIGI is likely to remain in downtrend. However, this downtrend is not likely to exceed the April low as the earnings of the company is recovering.

 
Chart 2: Digi's weekly chart as at Jul 11, 2016 (Source: Shareinvestor.com Tradesignum)

Nevertheless, Digi is in a long-term uptrend line with support at  RM4.30 In April.


Chart 3: Digi's monthly chart as at Jul 11, 2016 Feb 6, 2014 (Source: Shareinvestor.com Tradesignum)

Conclusion

Based on unattractive valuation & mildly negative short-term technical outlook, Digi is rated 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, Digi.

LPI: Bumper Profit from Sale of PBBank Shares

Result Update

For QE30/6/2016, LPI's net profit rose by 225% q-o-q or 148% y-o-y to RM213 million while revenue rose 6% q-o-q or 11% y-o-y to RM339 million. Profits increased substantially due  to both realized  gain  of RM150.4 million on  disposal  of  investment  in  quoted  equities as  well  as  better  underwriting experience.


Table 1: LPIs last 8 quarterly results

For the past 2 years, LPI's earnings had been erratic due to realized gain from the disposal of quoted securities, mainly PBBank shares. I have presented below, the unadjusted (in pink) & adjusted earnings (in yellow) to show the performance of the company. The adjusted earnings exclude the gain on disposal of investment in equities - which yielded huge gain in QE30/6/2016, QE30/6/2015 & QE31/12/2014 of RM150.4 million, RM39.2 million & RM59.9 million respectively. After the adjustment, we can see that LPI's net profit margin is steady at around 20%. 


Chart 1: LPI's last 42 quarterly results

From the increased earnings, LPI has increased its dividend payment gradually since 2014. Based on dividend of 75 sen in the past 4 quarters, LPI's dividend yield is about 4.6%. With its holding of 42.5 million PBBank shares today (valued at RM811 million), LPI can continue to book in the unrealized profit of this investment and keep up its dividend payment. 


Chart 2: LPI's dividend for last 42 quarterly results


Table 2: LPI's holding of PBBank shares
 
Valuation

LPI (closed at RM16.14 yesterday) is now trading at a trailing PE of 12 times (based on last 4 quarters' EPS of 137.38 sen) or 20 times (based on last 4 quarters' EPS [excl. gains on disposal of quoted shares] of 81 sen). Compared to the adjusted earnings growth of 19% for the last 4 quarters, the adjusted PER of 20 times will give a PEG ratio of 1.05 times. Thus LPI appears to be fairly valued.

Technical Outlook

LPI is in a long-term uptrend, with support from the 10-month SMA line at RM15.50.


Chart 3: LPI's monthly chart as at July 11, 2016 (Source: ShareInvestor.com)

 Conclusion

Based on good financial performance, fair valuation & positive technical outlook, LPI is still a good stock for long-term investment. Rating downgraded one notch to BUY 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, LPI.

Monday, July 11, 2016

MYEG: Testing Strong Support

MYEG was fined RM2.272 million in June by the Malaysian Competition Commission for abusing its dominant position in the online foreign workers permit ('PLKS') renewals processing when its its wholly-owned subsidiary, My E.G. Commerce Sdn Bhd (MyEG Commerce) participates as an insurance agent in the PLKS applications. The participation of MyEG Commerce has caused competitors offering insurance coverage to be at a disadvantage. MYEG has been given 60 days to rectify the situation, failing which a higher daily fine will be levied against it.

From the chart below, we can see that MYEG peaked in early January at about RM2.30. After that, it has dropping in a downward channel, R-R, R1-R1). Today the share price touched the lower line, R1-R1 at RM1.72. This is also the accelerated uptrend line S1-S1 support as well as the horizontal line. Thus I believe the stock is likely to enjoy a technical rebound from here. We will have to wait for a while to see whether the low today the end of the current downtrend or merely a temporary bottom.

From the recent post, we can compute MYEG's trailing PER at 37x (based on current price of RM1.78 & EPS of 4.8 sen). MYEG's earning has a CAGR of 60%; giving it a PEG ratio of 0.6x. Thus, MYEG is deemed attractive as a growth stock as its PEG ratio is less than 1x.

Based on this valuation, MYEG could be a decent stock to consider for your investment at the current price of below RM1.80. You are advised to exercise careful discretion if you choose to trade this stock.


Chart: MYEG's weekly chart as at July 11, 2016_3.15pm (Source: Kenanga/Chartnexus)
 
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, MYEG.

Unisem: Potential Bullish Breakout

Current Technical Outlook

Last Friday, Unisem broke above the intermediate downtrend line, RR at RM2.46. It rallied to a high of RM2.60- 10 sen short of its April 2015 high of RM2.70- and closed at RM2.54. The price breakout- coupled with MACD above the zero line and +DMI above -DMI - could signal the continuation of Unisem's uptrend after a pause of more than 1 year. (Note: Momentum is still lacking as revealed by ADXR below 20.)


Chart 1: Unisem's weekly chart as at July 8, 2016 (Source: ShareInvestor.com)

If the breakout gathers enough momentum, Unisem's next upleg could go as far as RM5.00.


Chart 2: Unisem's monthly chart as at July 8, 2016 (Source: ShareInvestor.com)

Recent Financial Results

For QE31/3/2016, Unisem's net profit dropped 43% q-o-q but rose 48% y-o-y to RM35 million while revenue was down 10% q-o-q but rose 13% y-o-y to RM318 million. Revenue rose y-o-y mainly due to improved average selling prices arising from the appreciation in the US$/RM and US$/RMB exchange rates. The improvement in net profit was due to increased revenue and improved margins from better contribution in our wafer bumping and advanced package operations. Unisem's packaging operation includes wafer level chip-scale packaging, a high margin product, for customers in the smartphone, PC, and automotive segments. Could this new packaging method enable the company to continue to report higher profits? We have to wait and see. (For more, go to the Star newspaper article dated 30/4/2016.)


Table: Unisem's last 8 quarterly results


Chart 3: Unisem's last 46 quarterly results

Valuation

Unisem (closed at RM2.54 last Friday) is now trading at a PE of 11 times (based on annualized FY14E EPS of 23.05 sen). At this multiple, Unisem - a cyclical stock - is deemed fairly valued.

(Note: The major shareholder of Unisem, John Chia has been buying steadily for the past 8-9 months. Since January, John Chia has added 6 million shares to his direct & indirect holding; raising his total shareholding from 24.9% to 25.8%. For more, go to Unisem's Changes in Shareholding.)
 
Conclusion

Based on improving technical outlook, I revise my rating for Unisem from SELL INTO STRENGTH to a HOLD. Please exercise careful discretion if you choose to trade the breakout as the stock could be at its peak earning now.

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, Unisem.

Monday, July 04, 2016

Selamat Hari Raya from Nexttrade


I wish all my readers a joyous and blessed Hari Raya AidilFitri.


 Source: creativitywindow.com

CIMB: Signs of A Bottom

Background

On June 25, Starbiz featured a write-up on CIMB entitled "CIMB Is Back". There are a few interesting points made in the interview with its CEO, Tengku Zafrul, such as:
1. CIMB will not be calling for a Right Issue to increase its capital base. It managed to raise more capital by selling off its non-core businesses.
2. It seems to suggest that the Indonesian operation may be bottoming out. This operation, which used to contribute ~40% to its bottom-line, suffered a drop of more than 70% in the past 2 years. If this operation can actually turnaround, the impact on CIMB's bottom-line will be significant.
3. It's working to lower its cost-to-income from 59% in Jan 2015 to 53% for 2016.

Last 10 years performance

In the past 2 years, CIMB's profits had been sliding due to the need to make loan loss provision on its Indonesian business. CIMB's CEO had spoken to their clients in Indonesia and they want to invest. He is expecting 2nd half to be better than 1st half.


Chart 1: CIMB's last 10 years' results

Last 5 years performance

From the half-year performance, we can see that things are slowly turning around.


Chart 2: CIMB's last 5 years' results (presented in half-yearly numbers)

Valuation

CIMB (closed at RM4.31 last Friday) is now trading at 0.9x  its book value of RM4.80 as at 31/3/2016. This makes CIMB the cheapest big bank in Malaysia. (Note: AMBank is trading at a PBR of 0.9x but AMBank is a medium-size bank.)

Technical Outlook

CIMB is trading just below its long-term uptrend line. To counterweight this bearish sign, we have two bullish indicators reading:
1. MACD crossed above its MACD signal line
2. ADXR has peaked though the -DMI is still above the +DMI


Chart 3: CIMB's monthly chart as at July 1, 2016 (Source: ShareInvestor.com)

Below, I have plotted the 10 years chart against 10 year financial performance. If the bottom-line turnaround, the share price should swing back up.


Chart 4: CIMB's monthly chart as at July 1, 2016 & 10-year results (Source: ShareInvestor.com)

Conclusion

Based on slight improvement in financial performance and attractive valuation, CIMB could be a good banking stock to consider for your investment portfolio.

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, CIMB.