TM & its 3 related CWs poised to go higher

From the Edge Daily, we have this report about TM's good results for FY2006

Telekom Malaysia Bhd posted an impressive set of results for fiscal year ended Dec 31, 2006, recording net profit of RM2.07 billion, up 155% from a year ago, boosted by higher group revenue, better cost and financial management and foreign exchange gain.

It said on Feb 23 group revenue rose 17.6% to RM16.4 billion, driven primarily by the cellular, data services, Internet and multimedia segments. Overseas operations contributed 25% to the group’s revenue, up from only 13% in 2005.

It recommended a final dividend of 30 sen per share, bringing the total dividend payout of 2006 to RM1.14 billion, representing 55% of TM’s profits.

For full report, go here.

I believe this good results will likely to push TM's share price above its current resistance of RM11.00, thereby triggering a bullish breakout. In such an event, a technical 'BUY' would be issued and one should act accordingly. See Chart 1 below.


Chart 1: TM's daily chart as at February 23

One reader has posted a question about the performance of TM's related CWs, in particular TM-CB. I believe all the CWs of TM are giving the same potentially bullish picture, like its underlying share. If you look at the 3 following charts, you will see that TM-CA & TM-CB have broken out on Friday, albeit closing at their respective breakout level. TM-CC is a tad slower, but I expect it to do the same if TM were to surpass RM11.00 on Monday.



Chart 2: TM-CA's daily chart as at February 23



Chart 3: TM-CB's daily chart as at February 23



Chart 4: TM-CC's daily chart as at February 23

I think that many are concerned about TM-CB since it is expiring on March 16 (less than 20 trading days to go). You may recall that even if a CW is nearing its expiry date, the CW will still go up if the underlying share has a strong move. See the example of Astro-CA & BJToto-CA. In any event, TM-CB is a cash-settled CW & you need not worry about coughing out a large sum to exercise your call option.

Watch TM & its CWs closely tomorrow. Buy them if TM has broken above RM11.00. If you are concerned about the short tenor for TM-CB, then buy TM-CA or TM-CC. Of these 3 CWs, TM-CC has the highest premium of 4.6% (not excessively high) while TM-CB trades at a slight discount and TM-CA at a parity.