Thursday, December 27, 2007
Over the next few weeks, UEMBLDR's share price could recover further to test its overhead resistance levels at RM1.30, RM1.45 & RM1.60. As such, UEMBLDR- at the overnight price of RM1.19- could be a fairly rewarding Trading Buy, for a holding period of 2 to 3 months. Setting a stoploss for this trade must take into account the next strong horizontal support (and a psychological support) of RM1.00. Thus, the stoploss maybe set at, say RM0.95.
Chart: UEMBLDR's weekly chart as at December 26 (courtesy of Quickcharts)
Monday, December 24, 2007
During these holidays, let's take a break from the market & spend some time with family & friends. There should be sufficient time to make plans for the challenges and opportunities when 2008 is upon us. I like to take this opportunity to wish you and your family a Merry Christmas and a Happy New Year!
AirAsia Bhd's share price felt a downdraft over the last three weeks. That caused its price to spiral downwards amid heavy selling to a nine-month low of RM1.59 on Friday.
That occurred after two foreign brokers issued reports late last month, warning that the budget airline company was vulnerable to oil options it took on. Counter-parties could exercise their call options to buy oil from AirAsia at US$90 a barrel, which put it at risk if oil rose above that price.
Its CEO Datuk Tony Fernandes said those options “have been taken out with a plain vanilla option at US$79 two weeks ago.” Hence, “there is no exposure anymore” to the early option, he told this column.
It is observed the airline has started to show a trend of high growth as its operating profit rose to RM145.7mil in its first quarter ended Sept 30, 2007 compared with RM52.8mil in the same quarter last year. This could be attributed to economies of scale as Asia's biggest budget airline rapidly expanded under a management astute at managing its fleet operations and finances.
I have highlighted the important part of this report in bold & italic. There are 2 possibilities regarding Airasia's dealing in call options relating to oil.
Firstly, Airasia might have sold or written these call options because it felt that oil prices were heading lower & it could do without too much hedging or it might benefit from falling oil prices. Subsequently, the oil prices took a tumble. At that point of time, Airasia could do 2 things: it could choose to do nothing & continue to enjoy the falling oil prices, or it could buy new call options (plain vanilla option, in Tony's word) at lower prices in order to re-establish its hedge against future hike in oil prices.
- Secondly, Airasia could have sold or written these call options in order to benefit from a correction in oil prices. After oil prices had fallen off, Airasia went into the market to buy new call options (plain vanilla option, in Tony's word again) at lower prices; thus benefiting from the correct prediction of the direction of oil prices.
Chart: Crude Oil chart as at December 21 (courtesy of SuperCharts by Omega Research)
Based on its closing price of RM7.20 as at December 21 & its last 4 quarters' EPS totaling 58.0 sen, UMcca is now trading at a trailing PE of 12.4 times. I believe that there is still further upside of about 15-20% to this stock in the medium-term.
The share price of UMcca has been rising in a steady uptrend until mid-August 2007. Then, it went on a sharp rise- riding on the crest of a boom in the price of CPO. From a low of RM4.88 in mid-August, the share rose to above RM7.00 today. In the short-term, one can expect a fair bit of volatility on this stock. Despite the potential upside in the stock, a correction of its sharp price gain cannot be ruled out.
Chart: UMcca's weekly chart as at December 21 (courtesy of Quickcharts)
Based on the good results, UMcca is still a BUY for the medium-term.
Friday, December 21, 2007
Based on its closing price of RM3.26 as at December 21 & its last 4 quarters' EPS totaling 40.3 sen, Haio is now trading at a trailing PE of 8 times. This means that Haio is still relatively inexpensive.
Haio is still moving in a strong & steep uptrend. Immediate uptrend line support is RM2.95-3.00.
Chart: Haio's weekly chart as at December 21 (courtesy of Quickcharts)
Based on cheap valuation, Haio is still a good BUY for the medium-term.
Wednesday, December 19, 2007
Its latest quarterly results for QE31/10/2007 shows that its net profit has increased 23.7% q-o-q or 286% y-o-y to RM6.8 million (see the table below). While its turnover has increased by 12.4% y-o-y to RM54.5 million, it actually dropped by 14.4% when compared to the preceding quarter's number. The better profit was attributable to new business for new models such as Perodua Viva, Nissan Latio & Toyota Vios. TSM has benefited from an extraordinary gain from the sale of an investment of RM1.57 million for QE31/10/2007. If this were excluded, TSM's net profit for QE31/10/2007 would be about RM5.21 million. This means that its net profit would be lower by 5% as compared to the net profit for QE31/7/2007.
If TSM can maintain its current profitability, it might report an earning of 35 sen for the FY2008, or 40 sen for FY2009. At yesterday's closing price of RM1.12, TSM is trading at a trailing PE of 3.2 times (or, a forward PE of 2.8 times).
From chart, you can see that TSM has been range-bounced for the past 2 & 1/2 year between RM0.94 & RM1.54. The psychological RM1.00 horizontal support is currently supporting the share price. Technically speaking, TSM has yet to show any bullish sign that has attracted a BUY call.
Chart: TSM's weekly chart as at December 18 (courtesy of Quickcharts)
TSM is an attractive stock trading at a cheap PE multiple of about 3 times. I rate TSM as a long-term BUY because its technical picture has yet to turn bullish.
(I have subsequently amended a small portion of the post. The amended portion is shown in bold, italicized lettering.)
Chart: IGB's weekly chart as at December 18 (courtesy of Quickcharts)
VS has experienced a very rapid growth in the past 2 years, but the past few quarters may have shown that a slowdown may have occurred. While this maybe a good thing for any company, investors might become jittery & decide to take some profit. Nevertheless, it is heartening to note that VS' share price is still not too far off its recent high of RM4.20-26. It may not be a bad idea to cash in some profit from this investment (see earlier post). Admittedly, the chart has not given any SELL signal at this moment, but a sharp correction after its recent sharp rise cannot be ruled out.
Chart: VS' weekly chart as at December 18 (courtesy of Quickcharts)
Tuesday, December 18, 2007
Was the sharp spike in the share price & the subsequent plunge attributable to the ROS of the YTLPower shares. I don't think so. If you were to value this entitlement, a YTL shareholder with 1000 YTL shares would receive only 67 YTLPower shares at RM0.50 each. Using the closing price of YTLPower as at December 12th of RM2.62, the gain from the ROS is about RM142.
The last time YTL made a similar ROS was in December 2006. That ROS was more generous at 1 YTLPower share for every 10 YTL shares owned, offered at a price of RM0.50 each. After the ex date, the price adjustment was milder, i.e. from RM6.95 to RM6.20. The gain from this ROS is about RM180 (based on YTLPower share price of RM2.30 for the weekended December 9th, 2006). Thereafter, YTL resumed its uptrend & hit a high of RM8.10 before the February & March selloff set in.
Based on yesterday's price of RM7.20, YTL has broken below its uptrend line support of RM7.40. A quick return to the RM7.40 level is important. We are seeing that rebound today. If successful, YTL could be a good Long-term Buy at RM7.40 (with a stoploss set at RM6.90, i.e. 10 sen below the psychological RM7.00 support).
Chart: YTL's weekly chart as at December 17 (courtesy of Quickcharts)
Chart: Airasia's weekly chart as at December 17 (courtesy of Quickcharts)
Chart: Commerz's weekly chart as at December 17 (courtesy of Quickcharts)
Monday, December 17, 2007
Chart: EONCap's weekly chart as at December 14 (courtesy of Quickcharts)
Chart: Timecom's weekly chart as at December 14 (courtesy of Quickcharts)
Tuesday, December 11, 2007
Mesiniaga Bhd ('MSNiaga') is involved in sale & service of IT products & related services. Its subsidiaries are involved in the provision of management training, consulting & outsourcing services and sales of networking cables & related products.
Past 5-year Financial Performance
The group's turnover has been increasing steadily from RM230 million to RM322 million, from FY2002 to FY2005. In FY2006, its turnover dropped marginally to RM316 million. I expect current year's turnover to equal that of FY2006. Pre-tax profit, which was maintained at RM27 million for FY2002 & FY2003, dropped to RM23 million in FY2004-2006. This is likely to drop further to RM10 million in the current year.
Recent Financial Results
MSNiaga's net profit for QE30/9/2007 increased by 43.9% q-o-q or 82.4% to RM3.5 million. Its turnover has increased by 7.1% to RM85.8 million from RM80.1 million recorded in the same quarter last year. Nevertheless, the turnover is lower than the preceding quarter's turnover of RM108.5 million.
MSNiaga suffered a net loss of RM1.7 million in QE31/3/2007 when its turnover dropped to RM42.6 million due to the deferment of projects.
Current Financial Position
As at 30/9/2007, MSNiaga's financial position is deemed satisfactory. Its liquidity position is healthy as reflected by its current & quick ratio of 3.14 & 2.94, respectively. Gearing ratio is negligible at 0.06 times. In term of working capital management, one will note that the inventory's turnover period has improved slightly from 17 days as at 31/12/2006 to 13 days as at 30/9/2007. If there is any concern about MSNiaga, it must be its high Trade Debtors figure. This has increased from RM153.2 million as at 31/12/2006 to RM165.3 million as at 30/9/2007, or 160 days to 176 days. I do not know the quality of these debtors and would have to depend on the management to determine whether these debtors are collectible. Presumably, any doubtful debts have been adequately provided for.
Based on MSNiaga's closing price of RM1.64 as at December 12th, the stock is trading at a trailing PE of 11.0 times (using its past 4 quarters' EPS of 15.0 sen) or 0.6 times its book value (using its NTA per share of RM2.80 as at 30/9/2007).
From Chart 1, we can see that MSNiaga share price has been drifting lower since making a high of RM18.90 in February 2000 (no doubt benefiting from the dotcom bubble). During the period from May 2005 to June 2007, the stock was trading between RM2.40-2.90. In July 2007, the the strong horizontal support of RM2.40 gave way & the stock trended lower (see Chart 2). From the low of RM1.60, MSNiaga has rebounded to test its downtrend line resistance at RM1.65-68 in the past 4 days. Unable to break through this resistance, the price is drifting lower again. A break above this downtrend line could potentially signal a temporary bottom for the stock.
Chart 1: MSNiaga's monthly chart as at December 11 (courtesy of Quickcharts)
Chart 2: MSNiaga's daily chart as at December 11 (courtesy of Quickcharts)
MSNiaga is a very attractive stock at the current level, where it is trading at a PE of 11.0 times its trailing earning or 0.6 times its book value. Ignoring the all-time high of RM18.90 recorded in the dotcom bubble period of 2000, the share price is substantially lower than its high of RM4.00-6.00 in 2002-2003. A sustained recovery in the Malaysian economy may see stronger spending in ICT industry; thus benefiting MSNiaga. At the current price, MSNiaga could have discounted substantially all its bad news.
Based on yesterday's closing price of the underlying shares & this morning price (at 9.30 am) for the CWs, their premium are computed & shown in the above table. It is unfair to compare EXMOBIL-C1's premium with those of APPLE-C1 & GOOGLE-C1, since the latter 2 CWs should command a higher premium because of their higher volatility. One may prefer APPLE-C1 over GOOGLE-C1 as the former instrument is trading at a lower premium than the latter.
The Valuation Measures for the 3 underlying stocks are presented below. You may note that both APPLE & GOOGLE are currently trading at PE of about 50-56 times their trailing earning, while EXMOBIL trades at 13 times its trailing earning.
Data provided by Capital IQ
I have presented below the daily charts for all 3 stocks. We can see that all 3 stocks have risen quite significantly since their August low. The price gain are very substantial for APPLE & GOOGLE (at 75% and 53%, respectively), while EXMOBIL has risen by 18% during that period.
Chart 1: APPLE's daily chart as at December 10 (courtesy of Yahoo Finance)
Chart 2: GOOGLE's daily chart as at December 10 (courtesy of Yahoo Finance)
Chart 3: EXMOBIL's daily chart as at December 10 (courtesy of Yahoo Finance)
Based on the rising trend of all 3 stocks, one may expect this trend to continue. If so, the aggressive approach is to position ourselves in the CWs of these stocks. This is a high risk trading strategy in a very volatile period, where one should not be surprise if the price of the underlying stocks were to adjust downward sharply. If this were to occur, the drop in the price of the CWs would be even sharper.
Monday, December 10, 2007
- TM International, which will undertake the mobile and non-Malaysian businesses of the TM Group, which is presently being carried out collectively by Celcom and the various operating subsidiaries and associated companies of TM International; and
- The new TM, which will carry on the retail, domestic and global wholesale fixed-line voice, data and broadband services and other telecommunication and non-telecommunication related businesses in Malaysia and regionally.
Thursday, December 06, 2007
Chart: Maybank' daily chart as at December 5 (courtesy of Quickcharts)
Alternatively, you can consider Maybank-CE or Maybank-CF. The terms of these CWs are:
- Maybank-CE (exercise price: RM12.40, exercise ratio: 10 for 1, expiry date: March 28, 2008)
- Maybank-CF (exercise price: RM11.80, exercise ratio: 2 for 1, expiry date: June 30, 2008)
Chart 1: KLCI's daily chart as at December 5 (courtesy of Quickcharts)
Chart 2: Crude Oil chart as at December 5 (courtesy of SuperCharts by Omega Research)
The continued recovery in the Dow and the correction in the price of Crude Oil (see Chart 2 above) may have provided the catalysts for this rally in the market. Despite the sharp gain among the blue chips, the rally has yet to broaden out. The second- and third-liners are still very quiet. Overall market volume has yet to increase significantly. So, all signs seem to point to a short rally for window dressing. If so, one may be better served by selling into this rally.
Tuesday, December 04, 2007
Chart: TM' daily chart as at December 3 (courtesy of Quickcharts)
Alternatively, you can consider TM-CF or TM-CG. The terms of these CWs are:
- TM-CF (exercise price: RM9.50, exercise ratio: 10 for 1, expiry date: May 23, 2008)
- TM-CG (exercise price: RM10.50, exercise ratio: 5 for 1, expiry date: July 21, 2008)
Monday, December 03, 2007
Chart: Tenaga' daily chart as at November 30 (courtesy of Quickcharts)
Friday, November 30, 2007
On November 27, MEMS announced that it was not able to issue its Audited Financial Statements by 30 November 2007, as the “external auditors have expressed concerns over certain transactions relating to revenue and property plant and equipment… the Board has resolved not to recognize revenue of RM19.72 million. As a result of this, the unaudited consolidated revenue for the financial year ended 31 July 2007 will be revised to RM53.7 million. This will consequently result in the unaudited profit after tax for the financial year ended 31 July 2007 to be reduced from RM21.47 million as announced on 27 September 2007, to RM13.45 million.” A special committee has been set up to look into this matter.
Before this announcement, the market was relying on MEMS' unaudited 4th quarter financial statement to assess the company's financial performance & position. Based on that statement, MEMS' net profit for FYE31/7/2007 has increased by 54% from RM14.0 million to RM21.5 million on the back of a 46%-increase in turnover from RM50.2 million to RM73.4 million. Now, this has to be revised down.
Based on the adjustment announced, it seems that MEMS' net profit for FYE31/7/2007 has actually declined by 3.7% (instead of a gain of 54%) while its turnover has only inched up by 7.0% (instead of 46%), when compared to the previous year's results. MEMS' EPS for FYE31/7/2007 will be lowered to 2.05 sen while its NTA per share would probably be adjusted from RM0.187 to RM0.175.
Chart: MEMS' weekly chart as at November 29 (courtesy of Quickcharts)
Since the announcement on November 27, MEMS share price has dropped by 46% from RM0.36 (at the close of November 27) to RM0.195 (at the close of November 29). This may appear to be disproportionate to the seriousness of the matter in hand. Here, we need to consider the following:
- Why were these "sales" booked in the accounts earlier?
- Are there any further accounting adjustment of a negative nature?
- What are the reasons for the slow growth in MEMS' turnover given that its products were reportedly cheaper than its competitors?
- Are the existing shareholders (such as Legg Mason) willing to overlook this serious accounting problem?
With the above questions still unanswered, I believe that it is too early to make any call on MEMS.
We can compute the average Implied Theoretical Price of the new Sime Darby (or, Synergy Drive) to be RM8.81 as at October 17. Since then, the market has gone through a lot of changes. Two things could affect the price of the new Sime Darby (or, Synergy Drive). They are the injection of Bakun Dam into the group & the appreciation of the price of CPO (the main business of the group). Assuming that we exclude the Bakun Dam factor (because it was common knowledge that the government was planning to do so), the CPO factor must be accounted for. From October 17 to November 29, the Plantation index has gone from 6848 to 7239 (or 5.7%) and if we factor this rise into the price, the Fair Value of the new Sime Darby (or, Synergy Drive) could be about RM9.31.
Tuesday, November 27, 2007
Based on the morning closing price of this CW at RM0.47 & the Toyota Motor Corp (Stock Code: 7203) as at 14.27 Tokyo time of Y6080, this CW was trading at a premium of 12.64%. At this premium, the CW is not cheap but not at sky-high premium that we have witnessed earlier. Looking at the chart of this stock & its key statistics, a case can be made for buying Toyota at the present price as well as buying the new Toyota-C1.
Toyota is probably the world's largest auto maker (for more details from Wikipedia, go here). Its shares are traded in Tokyo Stock Exchange ('TSE') as well as on other exchanges such London Stock Exchange ('LSE') & New York Stock Exchange ('NYSE'). For the purpose of valuing of Toyota-C1, the share price as traded in TSE will be used (see Chart 1).
Chart 1: Toyota's monthly chart as at November 26 (courtesy of TSE)
From Chart 1, we can see that Toyota share price has been correcting for the past 1 year. On November 22, the share price hit a low of Y5750 before rebounding. On further weakness, the share price may find support at the tentative uptrend line support of Y5500 or the horizontal support at Y5400. However, you can see that the faster 5-mth MA is poised to cut below the 25-mth MA, which will be a bearish sign. A strong rebound is needed to negate this negative sign.
To get a second look at Toyota's share price, I have appended the price chart of its trading in USD on the NYSE (see Chart 2 below).
Chart 2: Toyota's daily chart as at November 26 (courtesy of Yahoo Finance)
This chart also shows that the stock is near its tentative uptrend line support at USD105/6 or its horizontal support of USD108/9. Like the earlier chart, we can see that the faster 200-d MA is also poised to cut below the slower 300-d MA. Again, a strong rebound is needed to negate this bearish sign.
Based on Key Statistics provided by Yahoo Finance ( an extract provided below), we can see that Toyota is trading at attractive multiple of about 10 times its earning.
Based on fairly attractive valuation & a potential rebound in the price of Toyota share, the Toyota-C1 could well-surprise many to the upside. A slow entry over the next one or two weeks' time might be a safer option as one would be able to see whether the Toyota share price would cease to threaten its uptrend line as well as seeing the end of the initial market-making activities that tend to hold the CW at an artificially high price. If the share price does not break any of the above-mentioned uptrend line, a good entry to Toyota-C1 would be around the RM0.40 level (paying a premium of 10%).
The share price has dropped back since making its high of RM4.53 recorded on October 1st. The sharp price run-up in September & October preceded the bonus issue of 1:3, which went ex on October 16. Since then, the share price has corrected back about 22% (based on yesterday's closing price of RM3.52). In this morning session, the share price dropped 12 sen to close at RM3.40. This is very near the strong horizontal support of RM3.36-40 level, where a rebound may happen. If this support is violated, then the share price may test its uptrend line support at RM3.06-10 level. The uptrend line support could be a entry level for this very well-managed company.
Based on the last 4 quarters' EPS of 61 sen, Tongher is now trading at a trailing PE of 5-6 times. We do not know what's Tongher's future EPS will be, but assuming that it is 30% lower than the last 4 quarters' EPS, Tongher could be earning about 43 sen per share. Thus, at the price of RM3.40, it may be trading at a future PE of 8 times. Even at this adjusted earning, Tongher is still an attractive stock. Watch this stock closely.
Chart: Tongher's weekly chart as at November 26 (courtesy of Quickcharts)
Monday, November 26, 2007
The chart below shows that the share has done a 'test of the low' in the past few weeks. The stock did not make a new low and, with its MACD hooking up, it could be poised to recover soon.
Chart: WTHorse's daily chart as at November 23 (courtesy of Quickcharts)
In view of the good financial results & mildly positive technical set-up, WTHorse could a good buy at the current price.
Despite the improved financial performance, TGuan's share price has continued to slide. We will have to wait & see how the market receive this good set of results for TGuan.
Chart: TGuan's daily chart as at November 23 (courtesy of Quickcharts)
Based on the good results in the last quarter, TGuan is good contrarian BUY despite the poor technical outlook. At the current price of around RM1.00, the stock is trading at a PE of 5 times (if TGuan can continue to maintain an earning similar to its EPS achieved in the last quarter).
- lower production output due to the closure of the Ijok, Selangor plant while the output from its new Vietnam plant has yet to pick up sufficiently as commercial production has only commenced in June 2007;
- higher operating losses from its Thailand plant; and
- higher raw material cost & transport expenses.
Latitud has rebounded off its strong horizontal support of RM1.20. While the poor financial performance in the last quarter may lead to short-term weakness for this stock, the past few weeks' share price movement could be indicating that Latitud's share price might have bottomed. Its recovery would have to wait, for now.
Chart: Latitud's daily chart as at November 23 (courtesy of Quickcharts)
I still believe that Latitud is still a good long-term buy at prices between RM1.20-1.30.
Wednesday, November 21, 2007
In the past 4 quarters, its net profit seems to have hit a plateau. According to its latest quarterly results fro QE30/9/2007, Uchitec's net profit has dropped 13.4% q-o-q or 17.8% y-o-y to RM18.7 million while its turnover has also declined by 2.5% q-o-q or 5.3% y-o-y to RM39.2 million. The company attributed the decline in its net profit to the appreciation of Ringgit as well as changes in the product mix.
Based on the 9-mth performance, Uchitec is expected to register a small decline in its net profit for FY2007, which will break its profit track record, which shows a consistence growth since 2002. The group could recover from this small setback in FY2008 when its new plant in China is set to start operation.
Technical analysts may take a bearish view of Uchitec's recent share price decline. The share price seems to have peaked at RM3.40 & broke below its long-term uptrend line support of RM2.90 on November 2nd.
Chart: Uchitec's monthly chart as at November 20 (courtesy of Quickcharts)
Based on the technical SELL signal noted, it is advisable to avoid Uchitec for now.
Tuesday, November 20, 2007
Chart: KLCI's daily chart as at November 19 (courtesy of Quickcharts)