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Wednesday, July 30, 2014

MAS: This phoenix will not rise from the ashes unless...

I have received inquiries from time to time on many stocks. One name that comes up often is MAS. The question raised is whether this is a good time to buy MAS. My short answer has always been the same: There is never a good time to buy MAS.

Before I tell you why, let me tell you a short story. When I was working in Lee Wah Bank (now, merged into the UOB) in 1990, I knew of a customer who had 500,000 MAS shares. MAS was then trading at around RM10. This customer, who was a businessman of substantial means, pledged the block of MAS shares to the bank for a credit line. To give you a sense of the value of that block of MAS shares of RM5,000,000, you need to know that one bungalow in Pantai Hill in 1990 was worth about RM500,000. Today, a similar bungalow in Pantai Hill is worth at least RM5,000,000 each. Thus, 10 bungalows in Pantai Hills wirth RM5,000,000 in 1990s would be worth RM50 million today.

However, if the said customer has held onto his MAS shares and subscribed for the 3 Rights Issues carried out in 2003, 2007 & 2010, his investment in MAS would be worth only RM1.6 million! That's after spending RM3.1 million to subscribe for the 3 Rights Issue and holding onto his initial investment worth RM5.0 million in 1990s.


Table: MAS's investment performance since 1990


Chart 1: MAS's monthly chart as at July 25, 2014 (Source: Chartnexus)

In investing, we like to look out for recovery play. Who wouldn't want to get into Apple at USD4 in 1990s and to see the stock rallied to USD700 in 2012 (before it split 1-to-7 in June this year). Can MAS be an Apple?

I appended below 3 charts:
1. Profit & Loss chart shows that MAS is a company that has been threading on water even in good times.


Chart 2: MAS's topline & bottom-line for the past 13 years (Source: Equities Tracker & Nexttrade)

2. Cashflow chart shows that MAS can hardly generate positive operating cashflow. The only outstanding year was FY2007 when it generated an operating cashflow of RM2.37 billion. That can be explained by the followings:
  • Profit of RM841 million (contributed by Residual Value sharing on sale of aircraft by Penerbangan M'sia Bhd of RM209 million & gain on sale of properties of RM105 million)
  • Increase in Trade & Other Payables of RM477 million
  • Increase in Sales in advance of Carriage of RM613 million
In another word, MAS's operation had continuously drained its resources. In a world of scarce resources, MAS is a luxury that we cannot afford. The 3 Rights Issues had cost investors a total of RM7.66 billion. How much more must we spend before MAS can get its house in order?


Chart 3: MAS's cashflow for the past 12 years (Source: Equities Tracker & Nexttrade)

3. From the Current Ratio & Gearing Ratio chart below, we can see that if MAS does not raise fund from time to time, its financial position would be untenable. It would not surprise me if MAS were to propose another Right Issue in 2015.


Chart 4: MAS's  Current & Gearing Ratios for the past 10 years (Source: Equities Tracker)


Diagram: MAS's entitlements over the years

The question that must be asked - and, I am sure it had been asked many times in the past 6-7 years -is how to make MAS a viable airline? Well, what have we not tried? We've tried privatization! We've tried asset-light model! We've tried to ramp up load factor by lowering prices!It all failed.

For the sake of Malaysian taxpayers, let's stop kicking the can down the alley and let's bite the bullet. Let's try "bankruptcy" (or, whatever legal form that's available in Malaysia) and then a true restructuring where every stakeholder will share the losses or pain equitably. If we try this, MAS may rise again one day, like the proverbial Phoenix from the ashes.

Meanwhile, investors should avoid this stock. If there is no true restructuring, MAS will continue to bleed. If there is courage to undertake a true restructuring, you will have to take your losses immediately. This is a no-win situation!

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My take on MAS as an investment does not detract from my personal feeling regarding the senseless loss of 295 innocent lives in the tragic incidence that brought down flight MH17. The world must bring the perpetrators of this cruel criminal act to justice.



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, MAS.

Monday, July 28, 2014

Selamat Hari Raya








I like to wish all Muslim readers prosperity and happiness on the special occasion of Hari Raya Aidilfitri. May your home and heart be blessed with joy and peace.




(Source: Panasonic-aec.com)

Friday, July 25, 2014

Unisem: Earnings inched higher

Result Update

For QE30/6/2014, Unisem's NP rose 17% q-o-q to RM10.8 million while revenue rose 10.3% to RM252 million. Unisem returned to profitability compared to last year when it incurred a net loss of RM4.2 million on a revenue of RM247 million. The company attributed the higher net profit for the current quarter to the improved gross profit margin as a result of product mix change.


Table: Unisem's last 8 quarterly results


Chart 1: Unisem's last 39 quarterly results

Valuation

Unisem (closed at RM1.69 yesterday) is now trading at a PE of 28 times (based on annualized FY14E EPS of 5.96 sen). While the PE multiple is high, this multiple should ease off as the earning continue to improve.

Technical Outlook

From Chart 2, we can see that Unisem has swung up nicely. Its immediate resistance is at RM1.80 while the immediate support is at RM1.60.


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

Conclusion

Based on improving financial performance & bullish technical outlook, Unisem remains a good stock for long-term investment. Its valuation should improve with better earnings going forward.

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.

Thursday, July 24, 2014

UOADEV: Uptrend Intact


UOADev rebounded off its long-term uptrend line support at RM1.90-2.00. This rebound could carry the stock to the horizontal resistance at RM2.20 & then at RM2.40.

Based on potential recovery, UOADev could be a good stock for a trading BUY


Chart: UOADev's weekly chart as at July 23, 2014 (Source: Tradesignum)

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, UOADev.

DRBHCOM & MMCCORP: Good Entry Point!

The Nathan's Hot Dog Eating Contest is an annual American competitive eating competition held each year on July 4 at Nathan's Famous Corporation's restaurant in Coney Island, New York. (Source: Wikipedia)

In the past few years, Corporate Malaysia has its own version of the Hot Dog Eating Contest and we all know who has been the runaway winner every year. Lately, some of the companies under that group has not been doing too well.  

I listed here 2 such stocks that have declined to a level that you may consider buying. The first stock is DRBHCOM which is resting at the uptrend line support at RM2.15-2.20.


Chart 1: DRBHCOM's weekly chart as at July 21, 2014 (Source: Tradesignum)

The second stock is MMCCORP which is testing at the horizontal line support at RM2.30.


Chart 2: MMCCorp's weekly chart as at July 21, 2014 (Source: Tradesignum)

I believe that both DRBHCOM & MMCCORP should be able to rebound from their respective support level.

Conclusion
If  you share my technical take on DRBHCOM & MMCCORP, you can buy into these stocks. Hopefully your investment will perform like a champion!

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, DRBHCOM & MMCCORP.

Tuesday, July 22, 2014

AAX: The real deal?


In May, I posted that AAX's rally would fail if it could not surpass the downtrend line resistance. Today, we can see that AAX is again testing its downtrend line. This time, it looks like it has surpassed the downtrend line resistance at RM0.78-0.80. At the time of writing, AAX was at RM0.81.


Chart: AAX's daily chart as at July 21, 2014 (Source: Interachart)

Conclusion

Based on bullish technical breakout, AAX could be a good stock for a trading BUY. However, it is recommended that you calibrate your entry as AAX is still a loss-making concern.

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, AAX.

Friday, July 18, 2014

Cresbld: Bullish breakout!

Cresbld has just broken above its horizontal resistance at RM1.58-1.60. With this breakout, the stock is expected to continue with its prior uptrend.

The bullish outlook for the stock is shared by Cresbld-WB, which broke above its downtrend line at RM0.65. At the time of writing, Cresbld & Cresbld-WB were trading at RM1.63 & RM0.695, respectively.


  Chart 1: Cresbld's weekly chart as at July 17, 2014 (Source: Tradesignum)


Chart 2: Cresbld-WB's weekly chart as at July 17, 2014 (Source: Tradesignum)

A look at the 10-year financial performance shows that Cresbld is a profitable company. It suffered a sharp drop in revenue in FY2013 due to the completion of certain projects that carried high material cost. With EPS of 32.6 sen for FY13, Cresbld (at RM1.63 now) has a trailing PE of 4.5 times. At this PER, the stock is deemed inexpensive.

The only concern is its high receivable figure of RM191 million as at 31/3/2014. Based on a revenue of RM223 million,  Cresbld's debtors' collection period stood at 312 days.


Chart 3: Cresbld's last 10 years' result  (Source: Equities Tracker)

Based on technical breakout alone, Cresbld could be a 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, Cresbld.

Huayang: An unexplained q-o-q earning decline

Results Update

For QE30/6/2013, Huayang's net profit dropped by 37% q-o-q but rose 94% y-o-y to RM24 million while revenue dropped by 31% q-o-q but rose by 70% y-o-y to RM136 million. The y-o-y improvement was attributed to steady construction progress of all on-going projects. The q-o-q deterioration should be explained but it was not. I appended the company's explanation of its drop in this quarter as well as its rise in the immediate preceding quarter.


Table: Huayang's last 8 quarterly results


Chart 1: Huayang's last 24 quarterly results 

Valuation

Huayang (at RM2.36 yesterday) is trading at a PE of 6.7 times (based on last 4 quarters' EPS of 35 sen). At this PE, Huayang is still deemed fairly valued.

Technical Outlook

Huayang may have broken above its downward channel. However, for the stock to rise further, it needs to surpass the high of RM2.55 recorded in 2013. Failure to do so would set the stage for a double top reversal.


Chart 2: Huayang's weekly chart as at Jul 17, 2014 (Source: Tradesignum)

Conclusion

Despite the drop in financial performance, Huayang is still a good stock for long-term investment based on attractive valuation. Technical outlook is mildly positive but tricky as it needs to surpass its 2013 high of RM2.55 to avoid the dreaded double top reversal. For now, it 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, Huayang.

Zhulian: Earning dropped again!

Result Update

For QE30/5/2014, Zhulian's net profit dropped by 52% q-o-q or 78% y-o-y to RM8.3 million while revenue also dropped by 1% q-o-q or 38% y-o-y to RM66 million. Net profit dropped q-o-q mainly due to drop in revenue and higher expenses incurred, offset by slight increase in share of profit of equity accounted investee. Revenue dropped q-o-q mainly due to decrease in local market demand, offset by higher demand from Thailand market.


Table: Zhulian's last 8 quarterly results

 
Chart 1: Zhulian's last 31 quarterly results 

Valuation

Zhulian (closed at RM2.69 today) is now trading a PE of 16 times (based on last 4 quarters' EPS of 17 sen). With quarterly EPS sliding afresh, forward earning is likely to be around 10 sen. At that earning level, the stock is now trading at a PE of 27 times.

Technical Outlook

Zhulian is now testing its long-term uptrend line at RM2.50. This is also a strong horizontal support for the stock. From here, the stock should find some support and hopefully form a base. However, if this support is taken out, then Zhulian can drop to RM2.00-2.20.


Chart 2: Zhulian's weekly chart as at July 17, 2014 (Source: Tradesignum)

Conclusion

Despite the poor financial performance & expensive valuation, Zhulian is still rated a HOLD for now. If it breaks the RM2.50 mark, then Zhulian is traded a TRADING SELL.

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, Zhulian.

Thursday, July 10, 2014

Hovid: Bullish breakout





Hovid-WB broke above its rising 'horizontal' resistance at RM0.20 three days ago. The share also broke above its horizontal resistance at RM0.38 at the same time.



Chart 1: Hovid-WB's daily chart as at July 9, 2014 (Source: Tradesignum) 


Chart 2: Hovid's daily chart as at July 9, 2014 (Source: Tradesignum) 

Based on technical breakout, Hovid & Hovid-WB 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, Hovid & Hovid-WB.

NCB: Still Waters Runs Deep

Background

NCB has declined since it broke its uptrend line in July 2013. A retracement of nearly 100% of its gain from 2009 to 2013 means that this stock will a long time to recover. One can only hope that a bottoming phrase will kick in soon at RM2.80-3.00. Check out my last post (here).

 
 Chart 1: NCB's weekly chart as at July 9, 2014 (Source: Tradesignum)

Result Update

From Table 1, we can see that pre-tax profit improved q-o-q by RM6.5 million despite a drop in revenue of RM19.8 million. The improvement was due to lower losses in the Logistics operation of RM12.6 million which more than offset a decline of RM5.5 million in Port operation. Compared to previous year, pre-tax profit dropped by RM37.8 million while revenue dropped by RM25.3 million. The drop in profit was contributed by drop in pre-tax profit by both Port operation (of RM30.8 million) & Logistics operation (of RM7.4 million).


Table 1: NCB's segmental results


Table 2: NCB's last 8 quarterly results


Chart 1: NCBs last 27 quarterly results


Chart 2: NCBs last10 yearly results

Outlook

In addition to the losses in the Logistics operation, NCB faces challenges from WPRTS, such as the depth of its berths (generally shallower than WPRTS) and productivity of its berths & cranes (lower than WPRTS). The commencement of its new berth, CT4 in December 2013 could address the issue of maximum draft as CT4, which has a depth of 17m, can cater to ultra large vessels. CT4 has ready demand from existing customers, particularly Wan Hai (as per a report from Maybank IB Research). 


Table 3: NCB & WPRTS's Infrastructures compared (Source: Kenanga Research)


Chart 3: NCB & WPRTS's Terminal Utilization (Source: Kenanga Research)


Chart 3: NCB & WPRTS's Crane & Berth Productivity (Source: Kenanga Research)

Valuation

NCB (at RM2.95 yesterday) is now trading at a PB of 1 time and trailing PE of 59 times (based on last 4 quarters' EPS of 5 sen). On the other hand, the second port owner & operator in Port Klang, WPRTS (closed at RM2.74 yesterday) has a much higher PB of 6.1 times (based on NTA of RM0.45/share as at 31/3/2014) but a lower PE of 20 times (based on annualized EPS of RM0.139).

Conclusion

Despite the poor financial performance and bearish technical outlook, NCB may be worth considering for a long-term investment due to its substantial decline. The drop has brought out value in the stock as it trades at 1x its NTA per share.

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, NCB.

Insas: Uptrend to continue?

Insas has just broken above its intermediate downtrend line, RR at RM1.25-1.27. With this upside breakout, the stock could continue with its prior uptrend.


Chart: Insas's daily chart as at July 9, 2014 (Source: Tradesignum) 

Based on technical breakout, Insas 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, Insas.

Parkson: A stock for the contrarian

Background

Over the past 2 years, Parkson's share price has been declining (see Chart 1). It is now revisiting the 2009 low of RM2.30-2.50 (go here).


Chart 1: Parkson's weekly chart as at July 9, 2014 (Source: Tradesignum)

If you look at the last 8 quarterly results (in the table below) and the 29 quarterly results (in Chart 2), you will see that Parkson had a bad year in 2013. It bit the bullet in the end of CY2013 by terminating lease contracts of stores with potential closure which resulted in provision for penalty of RM46 million in QE31/12/2013. This has dragged down its earning for that quarter and hopefully will help in driving up its earnings in subsequent quarterly.


Table: Parkson's last 8 quarterly results


Chart 2: Parkson's last 29 quarterly results 


Chart 3: Parkson's last 10 years' results  (Source: Equities Tracker)


Valuation

Parkson (closed at RM2.50 yesterday) is now trading at a trailing PE of 19 times (based on last 4 quarters' EPS of 13.3 sen). If you expect Parkson's results to improve going forward, then the trailing PE is not very meaningful. It maybe more helpful to look at PB ratio and that ratio stood at an attractive 0.9 time.

Conclusion

Despite the poor financial performance for the past 2-3 years & bearish technical outlook, Parkson is a stock worth watching because it has dropped so much. I believe that the RM2.50 level could be a strong support and the base for a bottoming phrase for this stock. If you are a contrarian, you might start to slowly accumulate this stock.

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, Parkson.

Market Outlook: Who is calling the shots?

Over the past 1 year, the market action was not centered on the blue chip stocks nor the near blue chip stocks. This is clearly shown by the sideways movement in FBMKLCI (representing the Top 30 stocks) and the FBMMID70 (representing the next tier).


Chart 1: FBMKLCI's weekly chart as at July 9, 2014 (Source: Kentrade)


Chart 2: FBMMID70's weekly chart as at July 9, 2014 (Source: Kentrade)

The play was all in the 2nd & 3rd liners (represented by FBMSCAP); the fledgling stocks (FBMFLG) and the ACE Market stocks (FBMACE).

Of these 3 indices, the weakest group of stocks appears to be the stocks from the ACE Market. FBMACE was in a sideways movement for 4 years up to July 2013, when it finally broke above the horizontal line at 4800. Thereafter, FBMACE has been rising in an uptrend line, with support at 6500-6600. It is testing that support now.

We can see that there is a bearish divergence between FBMACE index and its RSI indicator. In addition, the Williams %R has broken below its uptrend line. Will FBMACE be the canary in the coal mine? Let's watch closely the ongoing test of the uptrend line support by FBMACE. If it breaks below 6500-6600, it could lead to further & sharper correction in the 2nd & 3rd liners across the whole market.  


Chart 3: FBMACE's weekly chart as at July 9, 2014 (Source: Kentrade)


Chart 4: FBMFLG's weekly chart as at July 9, 2014 (Source: Kentrade)


Chart 5: FBMSCAP's weekly chart as at July 9, 2014 (Source: Kentrade)