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)