Thursday, November 19, 2020

PETGAS: Better Earnings, Lower Prices

Results Update


For QE30/9/2020, Petgas's net profit increased by 8% q-o-q or 37% y-o-y to RM591 million while revenue rose 0.5% q-o-q or 5.2% y-o-y to RM1.407 billion. The Group maintained its strong performance for plant and facilities reliability across all segments during the quarter under review.  Gross profit improved by 9.0% or RM61.0 million to RM735.8 million on the back of lower operating costs by Regasification and Gas Transportation segments mainly due to lower internal gas consumption cost offset by higher repair and maintenance costs. PBT and profit for the quarter were higher by 13.5% or RM96.2 million and 11.5% or RM65.8 million respectively as higher gross profit was supported by higher unrealised foreign exchange gain, negated by lower share of profit from joint venture. During the quarter, the Group recorded higher unrealised foreign exchange gain on translation of USD assets and liabilities totalling RM92.8 million due to strengthening of RM against USD compared to gain of RM20.5 million in the preceding quarter. Lower share of profit was mainly attributable to scheduled shutdown during the quarter at Kimanis Power Sdn Berhad, the Group's 60% joint venture.


Table: Petgas's last 8 quarterly results


Graph: Petgas's last 57 quarterly results

Valuation

Petgas (closed at RM16.32 in the morning session) is now trading at a PE of 18x (based on last 4 quarters' EPS of 91.6 sen). At this PER, Petgas is deemed fairly attractive.

Technical Outlook

Petgas has dropped back to its long-term uptrend line with support at RM15.20.  


Chart: Petgas's monthly chart as at Nov 19, 2020_12.30pm (Source: Malaysiastock.biz)  

Conclusion

Based on satisfactory financial performance, fairly attractive valuation & mildly positive technical outlook, I think Petgas 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.

Saturday, November 14, 2020

Happy Deepavali

I like to wish all my readers of the Hindu faith a very HAPPY DEEPAVALI. May the illuminating lights of Diwali guide you in all paths in your life. 





Wednesday, November 11, 2020

Kossan: Earnings Soared But Share Price Floored

Result Update

For QE30/9/2020 (3Q20), Kossan's net profit rose 166% q-o-q or 6-fold y-o-y to RM349 million while revenue rose 47% q-o-q or 95% y-o-y to RM1.033 billion.

The improved performance was attributable to the improvement in all its three divisions – Gloves, Technical Rubber Products and Cleanroom. The improvement in the Gloves and the Cleanroom divisions were especially significant. To wit:

The Gloves division’s revenue increased 103.24% to RM946.57 million in 3Q20 from RM465.75 million in 3Q19, with PBT rising 670.80% to RM416.65 million in the current quarter as compared with RM54.06 million from a year ago. The improved performance was mainly attributable to the higher volume sold (+34.9%) and higher average selling price as compared with 3Q19.

The Cleanroom division grew revenue and PBT by 118.82% and 1131.80% respectively to RM40.25 million and RM10.19 million in 3Q20, as compared with RM18.40 million and RM0.83 million in 3Q19. The improved performance was mainly attributable to the increase in the demand for the division’s products as a result of the COVID-19 pandemic.


Table: Kossan's last 8 quarterly results


Graph: Kossan's last 56 quarterly results

Financial Position

Kossan's financial position as at 30/9/2020 is deemed healthy with current ratio at 1.7 times while gearing ratio was at 0.6 time.

Valuation

Kossan (closed at RM6.58 yesterday) is now trading at a trailing PE of 13.9 times (based on last 4 quarters' EPS of 47.36 sen). At this PER, Kossan is deemed fairly attractive. In fact, this PE is lower than the PE multiple assigned by the market in 2019. This shows that investors have begun to discount the impact of the vaccine on the future sales of Kossan as well as other glove makers. If the arrival of the vaccines are delayed or the logistics are too daunting, then there is a likelihood that the strong demand for gloves will persist for a while.

Technical Outlook

Kossan is in a long-term uptrend line, SS with support at RM7.00 yesterday. The breakdown of the uptrend line may lead to further decline unless a quick rebound takes place. In September, Kossan broke its uptrend line, SS but it rebounded the next day. We will have to wait and see how Kossan to fare today.


Chart: Kossan's monthly chart as at November 10, 2020 (Source: Malaysiastock.biz)

Conclusion

Despite the developing negative technical outlook, Kossan is a good stock for long-term investment based on good financial performance and financial position and fairly attractive valuation.

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, November 09, 2020

Market Outlook as at November 6, 2020

Last Friday, FBMKLCI broke above its medium-term downtrend line, RR at 1500, and rallied to close at 1520. This rally may continue this week as the world celebrates the return of sanity in America (barely). I expect FBMKLCI to challenge the next 2 resistance levels at the horizontal lines at 1540 & 1590 this week. 


 Chart 1: FBMKLCI's daily chart as at Nov 6, 2020 (Source: Malaysiastock.biz)

The same pattern was witnessed in FBMEMAS, which broke above its medium term downtrend line, RR at 10950 last Friday. It may test its next 2 resistance levels at the horizontal lines at 11050 and 11400.

 Chart 2: FBMEMAS's daily chart as at Nov 6, 2020 (Source: Malaysiastock.biz)

In New York, the MSCI Emerging Market ETF broke above the Jan 2020 high at 46 last Wednesday. It rallied to close the week at 47.93. This bullish breakout may signal the shifting of fund to emerging market as the incoming Biden administration is expected to raise taxes to finance its more progressive fiscal policies. 

Chart 3: EEM's weekly chart as at Nov 6, 2020 (Source: Stockcharts.com)

Based on the above, the market is likely to go higher in the near term. You may buy some beaten down blue chip stocks, such as Tenaga, Airport and Genting, if you want to ride on the expected price recovery. 

Monday, November 02, 2020

Market Outlook as at October 30, 2020

Last Friday, FBMKLCI broke below the support from the horizontal line, AB at 1480. If FBMKLCI does not recover quickly over the next 1-2 day(s), it may continue to slide to the next support at the horizontal line, XY at 1415.

Chart 1: FBMKLCI's daily chart as at Oct 30, 2020 (Source: Malaysiastock.biz)

If we are concerned that the fall in FBMKLCI may be caused by month-end closing shenanigans, then you can take a look at FBMEMAS (below). That index has not broken the line, AB connecting the 2 recent troughs. If FBMEMAS were to break below the AB line at 10600, then it may continue to slide down to the next support at the horizontal line, XY at 9860. 

Chart 2: FBMEMASs daily chart as at Oct 30, 2020 (Source: Malaysiastock.biz)

The non-confirmation from FBMEMAS does not take away from the current precariousness of our stock market. Below are the state of the various sectoral indices in our market:

Sectoral indices that are in a downtrend:

Sectoral indices that have started their downtrend:

Sectoral index that has peaked:

Sectoral indices that are still in an uptrend:

 Based on the above, we have to be very careful in taking large position in the market. 

Wednesday, October 28, 2020

Harta: Johnny Come Lately!

Result Update

For QE30/9/2020, Harta's net profit rose 148% q-o-q or 425% y-o-y to RM545 million while revenue rose 46% q-o-q or 90% y-o-y to RM1.346 billion. The higher sales revenue was attributed to higher sales volume and increase in average selling price for the quarter. Profit before tax for the quarter increased by RM 410.1 million or 150.3% y-o-y to RM683.0 million due to increase in sales revenue and better production efficiency.

 
 Table: Harta's last 8 quarterly results


Graph: Harta's last 52 quarterly results

Valuation

Harta (closed at RM18.28 yesterday) is trading at a trailing PER of 62 times (based on last 4 quarters' EPS of 29.47 sen). If we annualized the last 2 quarterly EPS of 22.44 sen to arrive at a full-year EPS of  44.88 sen, then its PER will be lowered to 40.7 times. 

Like in the case of Supermx, we are being too generous in using the annualized EPS of 44.88 sen to compute the PER for Harta as we looked ahead to the normalization of profit due to increased supply of gloves (as a result of increased capacity) as well as lower demand if Covid-19 pandemic were to subside. This will be a tough judgement call for analysts and investors.

Financial Position

As at 30/9/2020, Harta's financial position is deemed healthy with current ratio at 2.63x and gearing ratio at 0.44x.

Corporate Exercise Missing!

Unlike Kossan, Supermx and Topglov, Harta has yet to announce its bonus issue. The timing of that announcement will have a direct impact on the price movement in the near term. I expect a 1-for-1 bonus issue from Harta to be proposed in the next 2-3 months.

Technical Outlook

Harta share price has recently broken its short term uptrend line, S2-S2. The technical outlook for Harta will depend on whether it can surpass the intermediate downtrend line, RR at RM19.00. Until that happens, the near term outlook will likely be a sideways movement. 


Chart 1: Harta's daily chart as atOct 27, 2020 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance, satisfactory financial position and reasonable valuation, I revise Harta's rating to a HOLD.

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.

Supermx: It Gets Better!


 Result Update

For QE30/9/2020, Supermx's net profit rose nearly 100% q-o-q or more than 30 folds y-o-y to RM790 million while revenue rose 46% q-o-q or 266% y-o-y to RM1.352 billion. In the notes to the Financial Statement, the company explained its spectacular financial performance in these words:

"Supermax has again recorded a new record quarterly financial performance, achieving another historical high performance for the 2nd consecutive quarter. Revenue increased to RM1.352 billion from RM369.9 million from the previous year corresponding quarter. This increase translates to a 265.6% or RM982.6 million increase compared to the corresponding quarter a year ago. Profitability also increased sharply with EBITDA, PBT and PAT margins at its highest ever levels of 78.8%, 77.6% and 60.1% respectively. Comparing to the previous year corresponding quarter, the EBITDA, PBT & PAT has increased by 492.5%, 781.8% and 797.0% respectively."

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

Graph: Supermx's last 56 quarters' P&L

Valuation

Supermx (closed at RM9.78 yesterday) is now trading at a PER of 19.7x (based on last 4 quarters' adjusted EPS of 49.74 sen). If we annualized the last 2 quarterly EPS of 46 sen to arrive at a full-year EPS of  92 sen, then its PER will be lowered to 10.6 times. However, I believe to compute PER based on the annualized EPS of 92 sen may be too generous if we looked ahead to the normalization of profit due to increased supply of gloves (as a result of increased capacity) as well as lower demand if Covid-19 pandemic were to subside. This will be a tough judgement call for analysts and investors.

Technical Outlook

Supermx share price is well-supported by the intermediate uptrend line, SS at RM8.80 while the intermediate downtrend line, RR will cap its further upside at RM10.80. Given the strong earnings numbers, I think we may soon see a test of the intermediate downtrend line.

Chart: Supermx's daily chart as at Oct 28, 2020 (Source: Malaysiastock.biz)

Conclusion

Based on excellent financial performance, fairly attractive valuation and still positive technical outlook, Supermx deserved to be upgraded to a BUY.

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.

Thursday, October 22, 2020

Glove Stocks: Is That A Temporary Top?

Yesterday, glove stocks dropped sharply. The sell-off came after a 4-day lull in upward price movement for most of the big 4 glove stocks (except for Harta). The price drop yesterday broke the uptrend line in the current rally for most of the glove stocks, which began on 11 September. Unless the share prices can recover above the violated uptrend lines, the glove stocks could well have made a temporary top. 

Chart 1: Harta's daily chart as at Oct 21, 2020 (Source: Malaysiastock.biz)

Chart 2: Kossan's daily chart as at Oct 21, 2020 (Source: Malaysiastock.biz)

Chart 3: Supermx's daily chart as at Oct 21, 2020 (Source: Malaysiastock.biz)

Chart 4: Topglov's daily chart as at Oct 21, 2020 (Source: Malaysiastock.biz)

With increasing news flow of the imminent arrival of vaccines, investors would have to weigh the return from holding onto their glove stocks against the risks that the rally may have peaked. In times like this, investors should consider taking some cash off the table. Redeploying the proceed to some deeply sold-down stocks, like AIRPORT or GENTING, may be a good diversification strategy to benefit from the arrival of the vaccines and the normalization of life as we know. Good luck!