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Thursday, April 19, 2018

BAT: The Bottom could be in.


Today we are again seeing huge volume for British American Tobacco Bhd (BAT). As at 2:45pm, the volume traded for BAT was 1.67 million. BAT (at RM23.90 then) was up RM1.14 from yesterday close. I denoted this as “C”.

This huge volume and the price rally is the opposite of 2 previous days of huge volume in mid-Feb (denoted as “A”) and on April 17 (denoted as “B”). In the sell-off in mid-February, the share price dropped from RM33.00 to RM29.50. The sell-off on April 17 did not cause a noticeable drop in the share price.

These 3 days of huge volume suggests the presence of selling pressure in the market. The change in the price movement – from price decline to relative price stability and finally to price rally - suggest that BAT may finally have dropped to a price level that is cheap enough that we are witnessing a competition among the interested buyers. We can see it very clearly that these buyers are competing and it caused the share price to rally.

Chart 1: BAT's daily chart as at April 19, 2018_2.45pm (Source: Shareinvestor.com)

BAT is a well-managed MNC with a history of profit that stretches back as far as Bursa’s record is available. The last 2 years of lower profit was due mainly to the cost of restructuring as BAT closed its manufacturing plant and shifted its supply chain to a neighbouring country. This is a good opportunity to get into a well-managed company trading at very undemanding multiple.

Chart 2: BAT's monthly chart as at April 19, 2018_2.45pm (Source: Shareinvestor.com)

Graph: BAT's last 18 years revenue, profits and EPS/DPS

I think BAT is now attractive enough to buy since its peak at RM73 in late 2014. BAT’s PER is 13.8 times while its dividend yield is at a eye-popping 7.1%. I recommend this as a long-term BUY.

Note: For more on BAT, go to my earlier post.

Wednesday, April 11, 2018

Market Outlook as at April 11, 2018

Yesterday our market - along with many regional Asian markets - had a good rally. That rally could be just an oversold rally or it can be more than that. The fact that it came after the Chinese President Xi's speech about lowering of tariff on certain import has certainly took the wind out the sail of the trade warmongers in Washington.

Xi's speech must have been music to the ears in Wall Street as investors jumped into stocks and pushed DJIA up 429 points last night. This goes to show that the strong support at the 23500 mark -  from the uptrend line and the 200-day SMA line - can hold up the market. However, we must note that DJIA has a strong resistance at 24750 mark - from the medium-term downtrend line as well as the 50 & 100-day SMA lines. Thus, DJIA is likely to be trapped between these two levels - 23500 & 24750 - for next few days or weeks.


Chart 1: DJIA's daily chart as at April 10, 2018 (Source: Stockchart.com)

Our market is likely to see further recovery for the 2nd and 3rd liner stocks next few weeks. I don't expect blue chip stocks to move up much as FBMKLCI is less than 20 points away from the recent high of 1880.


Chart 2: FBMKLCI's daily chart as at April 10, 2018 (Source: Shareinvestor.com)


Chart 3: FBM70's daily chart as at April 10, 2018 (Source: Shareinvestor.com)

 
 Chart 4: FBMSCAP's daily chart as at April 10, 2018 (Source: Shareinvestor.com)

The 4 sectors that had dropped sharply are Properties, Construction, Technology and Trading Services. Properties and Construction indices are above their immediate downtrend lines while Technology and Trading Services indices are still testing their downtrend lines.


Chart 5: Properties & Construction's daily chart as at April 10, 2018 (Source: Shareinvestor.com)


Chart 6: Technology & Tradserv's daily chart as at April 10, 2018 (Source: Shareinvestor.com)

I like selective stocks from the Properties, Construction & Gaming sectors as well as a few other stocks like Astro, BAT & LAFMSIA. Good luck!

Tuesday, April 10, 2018

PMETAL: A Strong Rebound

Yesterday, PMETAL rallied strongly to close at RM4.38. The rally continues today as PMETAL broke above its intermediate downtrend line, RR at RM4.40. It went to a high of RM4.78. The next resistance will be the horizontal line at RM4.85. If it can surpass this level, it may go to RM5.00 or even RM5.25. What caused the strong rebound in PMETAL?


Chart 1: PMETAL's daily chart as at April 9, 2018 (Source: Malaysiastock.biz)

The answer is the sharp rally in the price of aluminium, as shown by the charts below. Aluminium may face resistance at the violated uptrend line, S1-S1 at USD2150.


Chart 2: Aluminium's daily chart as at April 9, 2018 (Source: Investing.com)


Chart 3: Aluminium's daily chart as at April 9, 2018 (Source: Investing.com)

The reason for the sharp rally in aluminium is due to the sanction imposed by the US government on Russian oligarchs for Kremlin's interference in US 2016 Presidential election and aggression in Crimea, Ukraine and Syria (here). The hardest hit is Rusal, a large aluminium exporter from Russia which is controlled by Deripaksa (here).

I think the benefit accruing to PMETAL is likely to be short-lived as commodity prices have a way of finding their equilibrium after a short interval. Unaffected producers may enjoy slightly better pricing term while affected producers will suffer a small disadvantage but not a total loss. Based on this, I believe the rally for PMETAL may run out of steam soon. We will have to wait & see.

Tuesday, April 03, 2018

Riding the Play of Inclusion in FBMKLCI

Last week, The Edge Financial Daily published an article entitled 10 companies' market cap overtakes FBM KLCI members'. The list is appended below, and I have highlighted the 3 stocks that may be included as component stocks (see green arrows) and 3 stocks that may be excluded (see red arrows).


From The Edge Financial Daily

Since the publication of this article, 2 of the possible new candidates for inclusion into FBMKLCI, Harta & Dialog have rallied strongly while 2 of the possible components of FBMKLCI that may be excluded, i.e. AMBANK and Astro have dropped quite sharply.

Of these 4 stocks, it must be noted that Harta is experiencing a over-factoring since its share price has rallied earlier due to a bonus issue. On the hand, Astro - the midget in the entire list - had reported an improved financial performance but nevertheless was bashed down to a new low since its re-quotation in 2012.

It must be noted that market capitalization is one of the 4 criteria for selection as a component stocks for FBMKLCI; the other being free float, liquidity & investability. In the hurry-burry world, we can get care-away by a rising stock or spooked by a declining issue. Let's not forget that the value of a stock is a function of its financial performance and underlying assets.

Thursday, March 29, 2018

PMetal: Downtrend Has Begun

Today PMetal finally succumbed to the selling pressure and crashed thru the recent low of RM4.73. It came within a hair's breadth of touching its 200-day SMA line at RM4.23. its intr-day low was RM4.29. Despite the rebound, PMetal is likely to commence on its downtrend. Thus, this stock is likely to under-perform the market.


Chart 1: PMETAL's daily chart as at Mar 29, 2018_4.15pm (Source: Malaysiastock.biz)

The likely reason for the technical breakdown in the share price is the weakness in the prices of aluminium. From the chart below, we can see that aluminium has broken its accelearted uptrend line at USD2100/mt.


Chart 2: Aluminium's weekly chart as at Mar 28, 2018 (Source: investing.com)

VS: Earnings Stayed Strong

Result Update

For QE31/1/2018, VS's profit before tax rose 26% q-o-q or 13% y-o-y to RM69 million while revenue rose 3% q-o-q or 46%  y-o-y to RM1.113 billion.


Table 1: VS's last 8 quarterly results

The Group recorded higher revenue y-o-y from its Malaysia & Indonesia segments which more than offset the decline in the China segment. Revenue for Malaysia segment rose due to higher orders from key customers while Indonesia segment benefited from a change in an existing customer's purchasing arrangement (from consignment to turnkey manufacturing). The China segment's revenue dropped due to change in sales mix and contribution from new customers.

Meanwhile, profit before tax increased to RM68.5 million from RM60.6 million in the previous quarter. The higher-than-proportionate improvement in profit before tax was mainly due to profit contribution from China as a result of better sales mix. Despite Malaysia segment's profit before tax was comparable to previous quarter due 


Table 2: VS's quarterly results contribution by geographical segments

From the graph below, we can see that VS's earning growth lagged behind its revenue growth, due to lower profit margin. If profit margin suffered in the past few quarters when USD-MYR exchange rate was favorable, how will VS perform when USD-MYR exchange rate turned unfavorable?


Graph: VS's last 52 quarterly results

Valuation

VS (closed at RM2.52 yesterday) is trading at a trailing PE of 17.5 times (based on last 4 quarters' EPS of 14.38 sen). At this PER, VS is deemed fairly valued.

Technical Outlook

VS had a strong rally after it broke above the horizontal line at 14 sen in 2014. However the monthly MACD is poised to do a negative crossover, which could lead to a period of price consolidation between the 20 & 30-month EMA lines at RM2.40-2.50.


Chart: VS's monthly chart as at Mar 28, 2018 (Source: Shareinvestor.com)

Conclusion

Based on satisfactory financial performance, reasonable valuation & still-positive technical outlook, VS is still a good stock for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Astro: Earnings Continued To Rise

Results Update

For QE31/1/2018, Astro's net profit rose 24% q-o-q or 25% y-o-y to RM182 million while revenue dropped 0.6% q-o-q or 0.7% y-o-y to RM1.39 billion.

Revenue dropped y-o-y mainly due to a decrease in subscription revenue, offset by higher merchandise sales, advertising and production revenue. The decrease in subscription revenue was mainly due to lower package takeup. The increase in merchandise sales was due to increase in number of products sold which was mainly driven by the tactical campaigns executed for the current quarter. The increase in advertising revenue was due to higher spending for year-end festive celebration.

Net profit increased by RM37.6m or 26.3% compared with the corresponding quarter due to lower net finance costs. Lower net finance cost was due to favorable unrealised forex gain arising from unhedged non-current balance sheet liabilities comprising, finance lease liabilities and vendor financing. The increase was offset with decrease in EBITDA and higher tax expenses.


Table 1: Astro's last 8 quarterly results


Graph: Astro's last 26 quarterly results

Valuation

Astro (closed at RM2.02 yesterday) is now trading at a trailing PE of 13.7 times (based on last 4 quarters' EPS of 14.79 sen). In addition, Astro paid out dividend quarterly which amounted to 12.50 sen for the last 4 quarters; giving the stock an attractive DY of 6.2%. Based on these PER and DY, Astro is deemed fairly attractive.

Technical Outlook

Astro dropped from RM2.90 in October last year to a low of RM2.02 yesterday. It is now revisiting the low when the stock was re-quoted in October 2012.


 Chart: Astro's weekly chart as at Mar 28, 2018 (Source: Malaysiastock.biz)

Conclusion

Based on satisfactory financial performance & attractive valuation, I believe Astro is a good stock for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Tuesday, March 27, 2018

Gtronic: Life Is Full Of Surprises

Result Update

For QE31/12/2017, Gtronic's net profit rose 74% q-o-q or 293% y-o-y to RM25 million while revenue rose 20% q-o-q or 124% y-o-y to RM105 million. Revenue rose q-o-q  due to the higher volume loadings and mass production of new products from certain customers in the Group. This led to a huge jump in net profit profit  to RM25.0 million from RM14.4 million in QE30/9/2017.

(Note: Gtronic's latest result for QE31/12/2017 was released on February 27.)


Table: Gtronic's last 8 quarterly results


Chart: Gtronic's last 48 quarterly results

Financial Position

Gtroni's financial position is healthy with current ratio at 2.5 times and gearing ratio at 0.4 time.

Valuation 

Gtronic (closed at RM4.52 yesterday) is now trading at a PE of 25 times (based on last 4 quarters' EPS of 18.04 sen). At this elevated PER, Gtronic is deemed fully valued.

Technical Outlook

Gtronic broke the strong horizontal support of RM5.80 on March 1. Then it broke below the intermediate uptrend line, SS at RM5.30 on March 21. Thereafter it quickly broke the next 2 horizontal lines at RM5.15 & RM4.80. It is now resting at the horizontal line of RM4.30. The selldown is likely due to overall poor market sentiment which has dragged down many stocks, including 2 other semiconductor stocks- MPI & Unisem. Life is full of surprises; just when Gtronic starts to deliver the goods, the share price took a plunge!!


Chart 1: Gtronic's weekly chart as at March 26, 2018 (Source: Malaysiastock.biz)

My technical studies below shows the stock has a tendency to go one-up before topping off. Despite the sharp drop, the stock is still trading above its long-term uptrend line with support at RM4.00.


Chart 2: Gtronic's weekly chart as at March 26, 2018 (Source: Malaysiastock.biz)

Conclusion

Based on satisfactory financial performance & position, Gtronic can be a good stock for long-term investment. Since the stock is still trading above its long-term uptrend line, I think it is fairly attractive after the recent selldown. 

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Monday, March 26, 2018

Haio: Cloudy Outlook Ahead

Result Update

For QE31/1/2018, Haio's net profit dropped 10% q-o-q but rose 25% y-o-y to RM19 million while revenue dropped 17% q-o-q or 4% y-o-y to RM103 million. Overall revenue dropped q-o-q mainly due to lower revenue generated from the MLM and Retail divisions which dropped 20.9% & 10.5% respectively. This has more than offset the increase in revenue for Wholesale of 4.0%.

Revenue for the MLM division was lower because of higher revenue in the immediate preceding quarter due to higher sales generated as a result of incentive trip promotion campaign and 25th year anniversary grand sales promotion. The revenue for the Retail division dropped because of higher revenue in the immediate preceding quarter was mainly derived from its half yearly members’ sales promotion campaign.

These led to lower PBT for MLM and Retail divisions of 27.1% & 80% respectively which more than offset the increase in PBT for Wholesale of 42.9%.


Table: Haio's last 8 quarterly results 


Graph: Haio's last 52 quarterly results

Financial Position 

Haio's financial position as at 31/1/2018 is deemed healthy with current ratio at 3.1 times and total liabilities to total equity at 0.3 times.

Valuation

Haio (closed at RM4.70 last Friday) is trading at a trailing PE of 17.7 times (based on last 4 quarters' EPS of 26.51 sen). Based on earning CAGR of 31% over the past 2 years, Haio's PEG ratio is about 0.6x. Thus, Haio is considered attractive as a growth stock.

Technical Outlook

Haio has risen sharply from RM1.50 in 2016 to recent high of RM5.60. However it has dropped below the horizontal line of RM5.10 as well as its 30-week EMA line at RM5.00. This could signal te end of the uptrend for the stock.


Chart 1: Haio's weekly chart as at Mar 23, 2018  (Source: Shareinvestor.com)


Chart 2: Haio's monthly chart as at Mar 23, 2018  (Source: Shareinvestor.com)

Conclusion

Based on good financial performance & fairly attractive valuation, Haio is a good stock for long-term investment. However I would rate Haio as Under-perform as its technical outlook has turned mildly bearish.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Market Outlook as at March 26, 2018

Since early January, our market has been behaving like a person with mental disorder. Blue chip stocks represented by FBMKLCI have gone higher while most other stocks have dropped sharply. This is borne out by the 5 charts below.


Chart 1: FBMKLCI's daily chart as at Mar 23, 2018 (Source: Shareinvestor.com)


Chart 2: FBM70 & FBMSCAP's daily chart as at Mar 23, 2018 (Source: Shareinvestor.com)


Chart 3: FBMACE & FBMFLG's daily chart as at Mar 23, 2018 (Source: Shareinvestor.com)

If you go thru the individual sector indices, you will notice that Finance and Consumer indices have gone up steadily or sharply, while Technology, Construction & Property indices have dropped substantially. It is quite possible that the gainers in our market have benefited from buying from local funds for political reason. Otherwise the stock market truly reflects the state of our economy; where retail players are just as tapped out as the man in the street. Until our economic growth expands widely and begins to fill the coffers of the man in the street, we probably will have to wait for a long time for the bulls to come back in our market.

US Market Outlook as at March 23, 2018

Dow Jones Industrial Average ('DJIA') has been swinging wildly for the past 2 months. The latest concern for Wall Street is the threat of a trade war started by Washington. Chartwise, DJIA is sitting right on the uptrend line as well as the 40-week EMA line (equivalent to the 200-day SMA line). If DJIA were to break below 23500 next week, the uptrend could be over. 


Chart 1: DJIA's weekly chart as at Mar 23, 2018 (Source: Stockchart.com)

The daily charts of DJIA and S&P500 show these indices are at their 200-day SMA line.


Chart 2: DJIA's daily chart as at Mar 23, 2018 (Source: Stockchart.com)


Chart 3: S&P500's daily chart as at Mar 23, 2018 (Source: Stockchart.com)

3 selected indices from France, Germany & Japan (3 largest OECD countries) show that their main market barometer have broken their uptrend lines.


Chart 4: CAC, DAX & NIKK's weekly chart as at Mar 23, 2018 (Source: Stockchart.com)

Fortunately, 3 selected indices from Asian markets (HSI, STI & BSE) show their main market barometers are still in an uptrend.


Chart 5: HSI, STI & BSE's weekly chart as at Mar 23, 2018 (Source: Stockchart.com)

Will Bursa Malaysia follow the Asian markets and stay afloat or will we tumble down if US markets go into a downtrend? We will have to wait and see.