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Friday, July 27, 2007

Digi has just tested its uptrend line

Digi has broken its medium-term uptrend line (in blue) at the RM22.75 level on July 23. Today, it has tested the longer term uptrend line at RM20.00/50 level. If this uptrend line support can hold, this could be a good entry level to this stock.



Chart: Digi's daily chart as at July 26 (courtesy of Quickcharts)


This is a technical recommendation without any consideration of the company's financial performance nor its financial position.

PBA may have a bullish breakout

Background

PBA Holdings Bhd ('PBA') is involved in the treatment & distribution of water for Penang. PBA is regarded by many as the best-managed water treatment and/or distribution company that is listed on the Malaysian stock market. The reason why it is less profitable than the other listed companies is because its treated water is sold at lower rates in Penang than in the other states.

Recent Financial Results

Based on the latest quarterly results for QE31/3/2007, PBA's net profit has increased by 11.2% q-o-q or 45.9% y-o-y to RM11.8 million. The improved profitability was attributed to higher turnover of RM43.9 million, an increase of 3.6% q-o-q or 7.8% y-o-y.

If you compared the last 4 quarters with the preceding 4 quarters, you can see that net profit has increased by 38.5% from RM30.4 million to RM42.2 million while turnover has gained 7.8% from RM162.6 million to RM175.2 million. EPS has similarly increased by 38.3% from 9.2 sen to 12.7 sen.



Current Financial Position

Based on the Balance Sheet as at 31/3/2007, PBA's financial position is deemed sound. Its liquidity position is adequate with current & quick ratio at 1.1 & 0.9 times, respectively. Unlikely others, PBA's Total Borrowings to Shareholders' Funds is very manageable at 0.2 times.

Valuation

Based on the trailing 4-quarter EPS of 12.7 sen & yesterday(27/7/2007)'s closing price of RM1.37, PBA is now trading at a PE of 10.8 times. That's relatively inexpensive for a defensive utility stock.

Technical Outlook

Since making a high of RM2.09 in September 2003, PBA has been in a downtrend. While it appears to have a breakout to upside of the downtrend line at RM1.28/30 level in mid-June, that breakout could not sustain & the share price eased back to find support at the downtrend line (see the 2 charts below). Yesterday, PBA made a big move & broke above the strong horizontal resistance at RM1.35. While the volume build-up has been fairly timid, I believe this breakout of the RM1.35 level could signal a bullish phase ahead for this stock.


Chart: PBA' monthly chart as at July 26 (courtesy of Quickcharts)


Chart: PBA' weekly chart as at July 26 (courtesy of Quickcharts)

Conclusion

Based on the bullish technical outlook and fairly decent fundamental picture, I believe PBA is a good investment for the medium-term. Good entry level is at RM1.35.

DJIA broke its medium-term uptrend line

DJIA dropped more than 310 points overnight on concerns about mortgage & corporate lending markets. The sharp drop has caused the index to violate its medium-term uptrend line at the 13700 level. You would notice that the index rebounded off its low of 13300, which is a strong horizontal support.

The Asian markets have been more volatile in the past few trading days, mirroring the current correction in the US & European markets. Despite greater volatility, most Asian markets (with the exception of the Japanese market) are still tracking their short-term, steep uptrend line. Today's trading could be different. The breakdown in Dow overnight could lead to similar breakdowns across the region. The Malaysian market, which has yet to breakout of its consolidation or waiting phase, may suffer less in term of drop in the main indices but the same may not apply to some stocks which had seen sharp price run-up lately.


Chart: DJIA's daily chart as at July 26 (courtesy of Yahoo Finance)

Friday, July 20, 2007

CWs for HK stocks as at July 19, 2007

The updated CWs valuation table for Hong Kong stocks are appended below. I have highlighted those attractively-priced CWs that are trading at premium of less than 4%. Since the Hong Kong stock market is doing relative better than our Malaysian market, it may be a good opportunity to benefit from this outperformance by 'investing' in these short-term derivatives.

Monday, July 16, 2007

HWL-C1 down on correction for the underlying share, HWL

HWL-C1 is one of those recommendation that I wish I have not made (go here). It was imprudent to call a buy on a stock [or, a CW linked to it] after a very sharp price run-up. From the daily chart below, we can see that HWL is likely to pull back & test its January high of HK$83.00 and, in the process, closing the July 9 gap. If the HK$83.00 support is violated, the next support would be the HK$82.00 level. A recovery from either level would likely lead to a recovery in HWL-C1. If both support levels are violated, it would be advisable to close your position on this CW, if you are still holding it.


Chart: HWL's daily chart as at July 13 (courtesy of HKEX)

This is strictly a technical call without any consideration of the company's financial performance & position.

Tuesday, July 10, 2007

Maybulk's uptrend to recommence

Maybulk has broken to the upside of the horizontal resistance at RM3.60/62 today. It gained 12 sen to close at RM3.72 for the morning. Volume for the morning session is marginally higher than normal at about 13,000 lots.

If Maybulk can sustain above the breakout level of RM3.60 over the next day or two, this stock's uptrend will continue. As such, Maybulk could be a good trading BUY.

Chart: Maybulk's daily chart as at July 9 (courtesy of Quickcharts)

This is strictly a technical call without any consideration of the company's financial performance & position.

Monday, July 09, 2007

CWs for HK stocks

There has been a few more listing of new CWs for Hong Kong stocks since my last posting in June. I have posted here an update for your guidance. Two CWs in particular are trading at a discount or at very low premium. They are HKEX-C1 and CCCC-C1. The former has been running up since the underlying share has a breakout in the middle of June ( see my post here). CCCC-C1 is a fairly new CW, only listed on July 5. The underlying share, CCCC has been on a strong uptrend since its listing in November last year (traded initially at HK$6.00). CCCC (closed at HK$17.78 today) has gained about HK$7.00 or 65% in the past 1 month alone. The attractive pricing of both HKEX-C1 and CCCC-C1 may reflect investors' cautious stance.



Looking at the above table, there are a few things that I like to point out. They are:
  1. For the purpose of computing the premium of the CW, I have used the exercise price stated in RM or RM equivalent. The exercise price highlighted in yellow is as per the Term Sheet. The exercise price stated in HK$ is converted to the RM equivalent at an exchange rate of HK$1=RM0.44.
  2. The market prices to be plugged in are highlighted in green. They are the underlying share price, which has been extracted from the HKEX website and the CW price, which is available from the Bursa website. The former will then be converted to RM equivalent at the same exchange rate as (1) above.
  3. For informational purposes, the IPO price of these CW & the underlying stock code are given. To check on the prices of the underlying share, you need to go here.

HWL-C1 could be a good trading BUY

Today is the first day of trading for HWL-C1, a call warrant issued by CIMB for the underlying share of Hutchison Whampoa Ltd ("HWL"). The main terms for HWL-C1 are:
  1. Exercise Price: RM34.25 (or HK$77.84, assuming exchange rate of HK$1 : RM0.44)
  2. Tenor: 6 months from issue date (June 22, 2007)
  3. Exercise Ratio: 10 to 1
HWL share price gained HK$3.40 to HK$86.40 as at 4.02 p.m. today. As a result, HWL has surpassed its recent high of HK$83.00 recorded in January this year. With this bullish breakout, I believe HWL should have further upside (see the chart below). To check on HWL share price, you can go here. HWL's stock code 13.



Chart: HWL's daily chart as at July 6 (courtesy of HKEX)

Based on the breakout of the underlying share, HWL-C1 could be a good trading BUY.

This is strictly a technical call without any consideration of the company's financial performance & position.

Thursday, July 05, 2007

Tenaga has just tested its medium-term uptrend line

Tenaga dropped 50 sen to hit RM11.00 at the start of the afternoon session. From the chart below, you can see that the RM11.00 level is both a strong horizontal support as well as the support given by the medium-term uptrend line.

Based on technical consideration, Tenaga is a good trading BUY at RM11.00.


Chart: Tenaga's weekly chart as at July 4 (courtesy of Quickcharts)

This is strictly a technical call without any consideration of the company's financial performance & position.

Shanghai- Another test ...

The Shanghai's SSECI may test its medium-term uptrend line at 3,700-3,750 today. Technically speaking, an uptrend line is likely to hold & provide the staging area for a recovery. SSECI has however exhibited some weaknesses that are worth noting. Firstly, on its recent test of the uptrend line in early June, the SSECI's uptrend line was violated before recovery. Secondly, the rebounce that followed failed to make a new 'high'. Finally, the MACD & Stochastics are both showing bearish divergence. This divergence is noticeable in April to May period, where both MACD & Stochastics were not making new 'highs' while the index was inching higher. And, again this can be seen now as both MACD & Stochastics are inching lower while the index has yet to surpass the early June low.

A break of the medium-term uptrend line support at 3,700-3,750 could lead to the consolidation of the overheated Shanghai stock market.



Chart: SSECI's daily chart as at July 4 (courtesy of Yahoo Finance)