1. IMP3 to sharpen our edge
The 3rd Industrial Master Plan ("IMP3"), which will be unveiled soon, will deal with the problem of how to broaden our export base as well as how to move from our heavy dependence on the Electronic & Electrical sector to high technology & knowledge intensive activities with high value added content. This is very relevance given the recent lagging performance of our export vis-a-vis other Asian countries, which gave rise to concern about our competitiveness.
2. CPO: How high will it go?
Whenever you read a headline like this, you have asked yourself whether it is time to be a contrarian. Money is never made with information that is openly available to everybody. Some stocks may be worth a trade but on the whole, one has to be very cautious at time like this. When things are too good to be true, normally they are.
3. Mesdaq: A fair share of the Gems
This week's cover story is on Mesdaq. While 38% of the companies listed in this Board reported a negative growth in their net profit, it is heartening to see that 35% managed to report more than 50% growth. The star performers are Green Packet, mTouche, Dreamgate, REDtone, GHL System & AKNMtech. AKNMtech??? A little story is in order here...
AKNMtech was a stock that I had recommended as a BUY in April 2004 when it was trading at RM2.60. The share price has been dropping ever since I've made that call and as at last Friday, it closed at only RM0.285! From this, I've learned an important lesson: Investing in Mesdaq shares is not easy. Some of the technologies involved are beyond our ability to fully comprehend and even if you do, the technologies & the regulations can change very rapidly that a good stock today can turn out to be a lame duck tomorrow. In this sector, technical analysis & protective stop loss are a must!!!
Having said that, one of the star performer i.e. Dreamgate is a stock that I am comfortable to recommend as a Long Term BUY. It supplies slot machines & casino games equipment. The casino scene in Asia is definitely picking up & Dreamgate is likely to get a big slice of the action. Based on CIMB's report dated 20060731, Dreamgate is expected to record an EPS of 12.4 sen & 14.4 sen for 2006 & 2007, respectively. This is a decent jump from only 10.0 sen for 2005. Based on the closing price as at August 11 of RM1.46, the share is trading at a PE of 14.6 times its 2005 earning.
From the chart below, we can see that the stock is in a ST uptrend but its upside is impeded by an overhead downtrend line. It is a good BUY at RM1.40 but a break above RM1.65 could signal the upside rally for the stock. It has a very strong horizontal support at RM1.35, so buying at RM1.40 is fairly safe.
Chart: Dreamgate's weekly chart as at August 11
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