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Wednesday, January 30, 2008

PPedana has a bullish breakout

Putrajaya Perdana Bhd ('PPedana') is involved in the construction and property development sector. It was formed in 1998 as a joint venture between Eastern & Oriental Bhd ('E&O') and Putrajaya Holdings Bhd. I have posted something on this stock in March last year (go here).

In August, it was announced that E&O has disposed of its entire 50.8%-stake in PPedana for RM2.90 per share to a group of investors form the Middle East (go here & here).

Yesterday, EPF has announced that it has acquired a 5.67%-stake in PPedana on January 18th. With this announcement, the share price of PPedana rallied up today to gain 38 sen (or, 10%) to close at RM4.24. This rally has caused the share price to break out of the ascending triangle pattern, with the breakout level at RM3.94-96. With this breakout, the stock could continue its prior uptrend & go higher.

Nevertheless, the current market condition may not be conducive for a sustained rally in the stock. In the event of correction, I believe PPedana could be a good Trading BUY at RM3.94-4.00.


Chart: PPedana's daily chart as at January 29 (courtesy of Quickcharts)

Plantation Index may have broken its short-term uptrend

The Plantation index has broken to the downside of its short-term uptrend line at 7900 (see Chart 1 below). Presently, it is holding at the immediate horizontal support of 7650. The next horizontal support is at 7200. If the index broke through these 2 supports, it may test to the next uptrend line support of 6400. If this level also failed, the medium-term uptrend line that stretches back to June 2006 might be tested. That uptrend line support is at 6000.

From the weekly Chart 2 below, we can see that Plantation index has accelerated over the past 2 years. This is in line with the steady rise in CPO index (see Chart 3 below). However, the recent correction in CPO prices from a high of RM3400 per tonne to RM3100 per tonne has led to some profit-taking for plantation stocks. This profit-taking was happening at a bad time, as equity markets whole wide was roiled by heavy selldown.

Based on the above, it may be advisable to take some profit from your investment in the plantation stocks. As the medium-term uptrend line is still intact, you should buy back these stocks when they have eased sufficiently, or when the Plantation index has tested its next uptrend line & recovered from it.


Chart 1: Plantation's daily chart as at January 29 (courtesy of Quickcharts)



Chart 2: Plantation's weekly chart as at January 29 (courtesy of Quickcharts)



Chart 3: CPO's daily chart as at January 21 (from Palmoil.com)

Monday, January 28, 2008

Shanghai's SSECI may drop ahead of lunar new year

Shanghai's SSECI appears to have made a top on October 16th last year when it recorded a high of 6124. In the past 3 months, SSECI has drifted lower. It had put in a lower' high' on January 14th & it had put in a lower 'low' last week. On the chart below, I have highlighted the 'highs' as 'A & A1' and the 'lows' as 'B & B1'. I would consider this a short-term downtrend as compared to the long-term uptrend that stretches back to March 2006.

This immediate horizontal support the SSECI is at 4400 & the next support at 3400. The long-term uptrend line support is at 3450-3500.


Chart: SSECI's 2-year chart up to January 25th (from Yahoo Finance)

A sharp drop in the SSECI ahead of the lunar new year next week may seriously impact the Hong Kong market. As many small players have invested in CWs of Hong Kong-listed stocks, our market may also be affected.

Friday, January 25, 2008

Landmrk has a bullish breakout

Landmark has just announced that its indirect 74%-owned subsidiary, Bintan Treasure Bay Pte Ltd has signed an agreement with PT Wisata Hiburia to designate a piece of land owned by the former & located on Bintan Island, Indonesia as an international Exclusive Integrated Tourism Zone (EITZ). The land would be zoned for medical tourism, gaming and information technology hosting and would comprise an integrated resort, commercial and residential properties.

This announcement has been anticipated by investors and it could be one of the main reasons why Genting has taken a stake in Landmark. It is interesting to note that Genting, via Genting International, is currently developing the Resorts World at Sentosa, one of the two huge integrated resorts development, that was approved by the Singapore Government in 2006. Resorts World at Sentosa will feature a 15,000-square-meter casino with about 300 tables & 2,500 gaming machines.

From the chart, we can see that the stock was holding quite well despite the recent market sell-off. It has broken to the upside of the short-term downtrend line at RM2.90. Today, the share- boosted by this announcement- has also broken above the strong horizontal resistance of RM3.10. It may test its recent high of RM3.60 soon.

On weakness, Landmark could be a good Trading Buy at RM3.00-3.10.


Chart 1: Landmrk's daily chart as at January 24 (courtesy of Quickcharts)



Chart 2: Landmrk's weekly chart as at January 24 (courtesy of Quickcharts)

Thursday, January 24, 2008

Market Outlook as at January 24, 2008

After the much-anticipated announcement of a 75-basis point cut in interest rate by the Fed, the global equity markets have rebounded. It will be a while before we will know whether this is enough to prevent a recession in the US, but for now, many believe that we might have seen a trading bottom. If this was a trading bottom, how high can this rebound go?

From the chart below, we can see that the immediate resistance at 1384, 1420 & 1450. The psychological 1400 level will naturally act as a resistance.


Chart: KLCI's daily chart as at January 22 (courtesy of Quickcharts)

While I anticipate a big rush to buy, I believe that we should not throw caution to the wind. Most stocks are likely to recoup 20-30% of their recent losses and if one can buy them relatively cheap, one might enjoy some trading profit. Nevertheless, the technical picture might have turned bearish for many major markets & this rebound could be a correction (i.e. an oversold rally) within a bear market.

Despite maintaining my bearish stance, I will withdraw my last remark in my previous Market Outlook where I implied that one should avoid buying in the market. That comment was made due to the extremely bearish outlook & my concern that a massive selling stampede was imminent. With some stability returning to the market, investors shall exercise their own discretion in their own trading or investment strategy.

Good luck.

Tuesday, January 22, 2008

Market Outlook as at January 22, 2008

Yesterday, the KLCI broke its medium-term uptrend line support at 1420, when it closed at 1408.60 (see Chart 1 below). At the end of the morning session, KLCI lost 56 points to close at 1352.


Chart 1: KLCI's daily chart as at January 21 (courtesy of Quickcharts)

From Chart 2 below, we can see that the KLCI has been trending upward in a channel. If we drew a line in the middle of the channel, we can see that whenever the KLCI has crossed above this line, the KLCI has a tendency to go near to the upper boundary of the channel. Similarly, whenever the KLCI crossed below this central line, it has a tendency to go near to the lower boundary of the channel. With the sharp fall experienced this morning, the KLCI has now crossed below this central line. Thus, we may see a test of the lower boundary of the channel at 1250-1270 in the near future. Hopefully, the KLCI would be able to hold above this level, or else the current longer term uptrend in our market would be terminated.


Chart 2: KLCI's weekly chart as at January 21 (courtesy of Quickcharts)

Given the current bearish outlook, it maybe advisable not to add to your position now. Use any rebound to reduce your position in the market. The bearish view is the result of a few major markets (such as DJIA, FTSE, DAX, CAC & Nikkei) exhibiting either possible long-term reversal or a break to the downside of their long-term uptrend line or their long-term 200- or even 400-day SMA. In my view, the global equity market could be entering into a bearish phase. Please ignore all earlier BUY recommendations until further notice.

Friday, January 18, 2008

Warisan- something is brewing...

A stock that I have recommended many years ago to my client- a perennial underperformer- has started to stir up. That stock is Warisan, a company has three core businesses — namely, consumer products which include its cosmetics operations; travel and car rental; and distribution and leasing of heavy machinery.

Last week, Warisan's share price broke above the RM1.95-97 level. This level has capped all past rallies for 4-5 years. The price gain is however on a very thin volume, which may be a reflection of the small available public spread as much as the lack of interest in the stock. Nevertheless, the share price was able to hold quite well above the RM1.95 level, despite the current bearish market. Presently, the share price is again inching up (the time is now 4.25 pm).

Something is brewing in Warisan. Keep a close watch on this stock.


Chart 1: Warisan's monthly chart as at January 17 (courtesy of Quickcharts)



Chart 2: Warisan's weekly chart as at January 17 (courtesy of Quickcharts)

Plantation stocks may recover on the back of firm CPO prices

With CPO index still holding onto its recent gain, the current sharp correction in the equity market may have thrown up some interesting Trading Buys amongst the plantation sector.


Chart 1: CPO's weekly chart as at January 17th (from ifs.marketcenter.com)

Amongst them are Sime, IOICorp & HSPlant, which had all tested their respective horizontal support & recovered. The horizontal supports are at RM11.50-60 for Sime; RM7.90-8.00 for IOICorp; and, RM3.30 for HSPLant.


Chart 2: Sime's daily chart as at January 17 (courtesy of Quickcharts)



Chart 3: HSPlant's daily chart as at January 17 (courtesy of Quickcharts)



Chart 4: IOICorp's daily chart as at January 17 (courtesy of Quickcharts)

KLK had corrected less & has yet to tested its horizontal support of RM17.00-20.


Chart 5: KLK's daily chart as at January 17 (courtesy of Quickcharts)

My preference is Sime, at RM11.50-60 level.

Thursday, January 17, 2008

Outlook of US equity market

I have attached below the 5-year charts of DJIA as at January 16 (Chart 1) & January 15 (Chart 2). When I wrote yesterday that "Except for Nikkei 225, all (the major) indices are still above their respective medium- and long-term uptrend line supports", I had in mind that DJIA as one of these indices that were holding above their uptrend line. One day later, the chart looks quite different. Other than the manner in which the uptrend line was plotted, the difference could be attributed to the absence of one or two days' data from Chart 2. If I were a bit more careful, I could have spotted this omission. From Chart 1 (i.e. DJIA as at January 16th), we can see that DJIA has just violated its long-term uptrend line at 12600-12700 level as well as its horizontal support at about 12500 level.

From Chart 3, we can see that S&P500 has also just violated its uptrend line at 1380 level, while holding onto its horizontal support at 1365 level.

Both DJIA & S&P500 must recover above their uptrend line quickly, failing which the US stock market could be entering into a bear market.


Chart 1: DJIA's 5-year chart up to January 16th (from Yahoo Finance)



Chart 2: DJIA's 5-year chart up to January 14th??? (from Yahoo Finance)



Chart 3: S&P500's 5-year chart up to January 16th (from Yahoo Finance)

Airasia- EPF bought a 5.2%-stake

EPF announced yesterday that it had purchased a 5.2%-stake in Airasia. Prior to this, EPF did not hold any shares in Airasia. This purchase is a strong vote of confident in the management of Airasia. Interestingly, T. Rowe Price Associates, Inc., one of the foreign funds that had been selling down its Airasia stake, announced on January 14th that it had purchased back 134,000 Airasia shares on January 7th.

The EPF purchase came one day after Airasia's press statement on the recent controversy over its fuel hedging policy. You may read more about here. The important gist is given below:

Due to the high volatility in oil prices, we are of the view that adopting a static hedged approach (through fixed/plain vanilla swaps) at current price levels would involve taking excessive risks. If one were to opt for a fixed swap now and should fuel prices retrace subsequently, we would be left with effectively an obligation to purchase expensive fuel with no room to manoeuvre out of the position. Therefore, we opted for a dynamic approach and layered fuel hedge structures.
This is how I envisaged Airasia would approach its hedging of fuel cost, but the actual working of the hedging is obviously more complex than layman, like us, could understand.

Chartwise, Airasia's uptrend line support at RM1.65-68 has since been violated. It is now holding above its horizontal support of RM1.50, with the next support at RM1.40. The overhead resistance will be at RM1.65.

Chart: Airasia's weekly chart as at January 16 (courtesy of Quickcharts)

Based on the entry of a "knowledgeable" investor of substantial mean, i.e. the EPF, I believe that the bottom for Airasia has been made. A BUY at the current level would be a fairly safe BUY.

Wednesday, January 16, 2008

Market Outlook as at January 16, 2008

After my last call on the market, I am very reluctant to post anything on market outlook. Nevertheless, let me just make one quick observation. I believe that the KLCI may find support at the following horizontal supports of 1450, 1420 & 1380. The immediate uptrend line support is at 1420.


Chart: KLCI's daily chart as at January 15 (courtesy of Quickcharts)

I have looked through almost all the major indices. Except for Nikkei 225, all these indices are still above their respective medium- and long-term uptrend line supports. Nevertheless, most of these indices are showing patterns of potential reversal and, given the sharp run-up in equity price over the last 2 to 3 years, the fear is now gripping everybody in the market.

After today's sharp drop, the market will take a while to recuperate. With that, the cautiously bullish outlook of my last market call can be consigned to the back burner.

Tuesday, January 15, 2008

Tenaga broke above its strong horizontal resistance of RM10.00

Tenaga has finally broken to the upside of its strong horizontal resistance of RM10.00 (as well as the immediate horizontal resistance of RM10.20). If this breakout can sustain, the stock may test its medium-term downtrend line at RM10.90. The RM10.90-11.00 level is also a strong horizontal resistance level.


Chart: Tenaga's weekly chart as at January 14 (courtesy of Quickcharts)

Another way of playing Tenaga's potential upside move is to buy either Tenaga-CG or Tenaga-CH, but avoid Tenaga-CF. See the table below for main terms & valuation.

Monday, January 14, 2008

Market Outlook as at January 11, 2008

The KLCI broke above the slanting overhead resistance of 1450 on January 4. In a matter of 5 trading days, it has gained another 66 points to close at 1516.22 on January 11 (with the psychological 1500 level taken out on January 11). This sharp rise is quite similar to the sharp rise in October 2006, when the KLCI broke above its overhead resistance at 970 as well as surpassing the psychological 1000 mark shortly thereafter (highlighted as "A" on Chart 1 below). Will the KLCI put in a performance over the next 4 months like what it has done in November 2006 to February 2007? Only time will tell.


Chart 1: KLCI's daily chart as at January 11 (courtesy of Tradesignum.com)

We have observed that the market breadth is rather poor & participation from the second- & third-liners is only starting to pick up lately. If we compared the performance of Mesdaq & Second Board indices in October 2006, we will note that these indices only begun to move after the KLCI has gained considerable ground. In fact, a sharp spike-up in both the Mesdaq & Second Board indices seem to be a pre-cursor to a correction in the market (see Chart 2 & 3 below).


Chart 2: Second Board's daily chart as at January 11 (courtesy of Tradesignum.com)



Chart 3: Mesdaq's daily chart as at January 11 (courtesy of Tradesignum.com)

Guided by what we have seen in the period from November 2006 to February 2007, we can surmise that the KLCI may still have someway to go on the upside and the second- & third-liners may be about to participate in the current rally.

Friday, January 11, 2008

HPI reported another good set of results

HPI, which manufactures corrugated carton & plastic packaging products, reported a better results for 2Q2008 (or, QE30/11/2007). For the period under review, HPI's net profit increased 10.6% q-o-q or 30.4% y-o-y to RM4.0 million. Its turnover of RM74.3 million was up slightly when compared to 2Q2007 turnover of RM70.8 million but was lower than the immediate preceding quarter's turnover of RM78.0 million.



Based on the last 4 quarter's EPS of 30.3 sen & today's closing price of RM1.01, HPI is now trading at a PE of 3.3 times.


Chart: HPI's daily chart as at January 9 (courtesy of Tradesignum.com)

From the above chart, it seems that HPI is trading near its medium-term uptrend line support of RM0.95.

Based on attractive valuation & nice technical picture, HPI is a good BUY for the medium-term.

Wednesday, January 09, 2008

Eng, yet another contrarian stock to consider

Background

Eng Teknologi Holdings Bhd ('Eng') is involved in the business of precision die-casting and manufacturing of mechanical components and assemblies.

Past 5-year Financial Performance

Eng's turnover has grown from RM103 million in FY2002 to RM381 million in FY2006. Despite the healthy growth in topline, its pre-tax profit contracted sharply in FY2006 because of a substantial drop in its business volume in its China operation from one major customer due to industry consolidation; spiraling raw material cost & additional start-up cost arising from its expansion in China.



Recent Financial Performance

The effect of the decline in business volume (noted earlier) & the higher operating cost due to the increased capacity was felt up to the third quarter ended 30/9/2007. In QE31/9/2007, Eng's net profit increased by 25.1% q-o-q or 91.5% y-o-y to RM9.4 million. Turnover jumped 38.8% q-o-q or 37.6% y-o-y to RM141 million.



If the improved performance of QE30/9/2007 can be maintained in QE31/12/2007, Eng may report EPS of 8.7 sen for FY2007. While this is still lower than the EPS of 23.9 sen for FY2006 or its best year (FY2005)'s EPS of 46.9 sen, Eng could well be on the road to recovery.

Valuation

Based on Eng's closing price of RM1.29 as at January 8th, Eng is now trading at a PE of 14.8 times (based on projected EPS of 8.7 sen for FY2007) or 0.9 times its book value (based on NTA of RM1.44 per share as at 30/9/2007).

Technical Outlook

From the monthly chart, we can see that Eng has been drifting lower for the past 4 years, from a high of RM3.64 recorded in March 2004. It has recently tested the horizontal support of RM1.20.


Chart 1: Eng's monthly chart as at January 8 (courtesy of Quickcharts)

On the daily chart, we can see that Eng share price is moving in a downward channel. Until the share price has surpassed the upper channel at RM1.55-60, Eng's recovery is not on the card yet.


Chart 2: Eng's daily chart as at January 8 (courtesy of Quickcharts)

Conclusion

Based on improving fundamental, Eng is a stock worth tracking. A contrarian may choose to buy slowly at the present level of RM1.20-30, but it may be safer to wait until the stock has broken to the upside of its downward channel at RM1.55-60.

Monday, January 07, 2008

Astro poised to break above its downtrend

Astro has been drifting lower in the past 10 months, from its recent high of RM5.80 recorded in w/e February 23 to an all-time low of RM3.06 on September 24th. Thereafter, the share price underwent a sharp rebound, which tested but failed to break above its prevailing downtrend line. In that throwback rally, Astro hit a reaction high of RM4.20 & dropped back before doing a 'Test of the Low' on November 30th. In that test, the stock did not make a new low & recovered. In the last few days, Astro was again hitting its medium-term downtrend line; this time at the RM3.60 level. A break to the upside of this downtrend line would signal the end of this downtrend. The share price may commence on an uptrend course or more likely to move in a sideway manner before going higher (if it can recruit enough buying interests).

If Astro can break above the RM3.60 level, the stock could be a good medium-term BUY. Accumulate slowly, with protective stoploss set at RM2.95 (i.e. below the recent low as well as the psychological support of RM3.00).


Chart: Astro's weekly chart as at January 4 (courtesy of Quickcharts)

Friday, January 04, 2008

Sime may have a bullish breakout

Sime has broken above its recent high of RM12.10 (recorded on November 30) this morning when it gained 30 sen to close at RM12.30. With this breakout, Sime's uptrend is set to continue.


Chart: Sime's daily chart as at January 3 (courtesy of Quickcharts)

For traders who maybe put off by Sime's high price, they can consider Sime-CB, a CW related to Sime which was listed on December 21st. Sime-CB's main terms are:
  1. Expiry Date: July 16th, 2008
  2. Exercise Ratio: 10-for-1
  3. Exercise Price: RM12.00
From Chart 2 below, we can see that Sime-CB has an overhead resistance at RM0.175. Traders will be watching & waiting for a break above that level before going long on this CW.


Chart: Sime-CB's daily chart as at January 3 (courtesy of Quickcharts)

Thursday, January 03, 2008

TM's mobile arm spin-off attracts strong interests

TM's proposed demerger exercise, which will result in the spin-off of its mobile arm, has attracted a lot of interests. A stake of about 10% of the mobile arm (which is generally referred to as the "RegionCo") maybe placed out to either foreign funds or an international telecommunication company. Amongst the interested parties are Vodafone (see this story) and AT&T (see this story). I think Vodafone may have an inside track as it has prior dealings with TM as well as being the second largest mobile operator in the world (with the top place going to China Mobile). As at January 2007, Vodafone has more than 200 million customers in 25 markets, spread across 5 continents.

Regardless of how the spin-off will be done, TM share price has been trending up since the proposed demerger exercise was first announced in September last year. From the chart below, we can see that the uptrend line support is at RM10.90-11.00, which will be a good entry level for this stock.


Chart: TM's daily chart as at January 2 (courtesy of Quickcharts)

Wednesday, January 02, 2008

SSteel may have a bullish breakout

SSteel has broken above its strong horizontal resistance of RM1.88-90 this morning, when it gained 20 sen to close at RM2.00. The RM2.00 level is a strong psychological resistance level, where the stock may take a pause before going higher. The next resistance levels are seen at RM2.20 & RM2.35.


Chart: SSteel's weekly chart as at December 31 (courtesy of Quickcharts)

The performance of SSteel share price mirrored that of the bigger steel stocks, such as Annjoo & Kinstel. Other smaller players that are worth watching are Masteel & Onastel.

Masteel may have broken to the upside of its bearish "wedge" at the RM1.65 level.


Chart: Masteel's weekly chart as at December 31 (courtesy of Quickcharts)

Onastel is a tad slower than the other steel stocks and, as such, it may be a relatively safer bet. Nevertheless, this stock has yet to break above its short-term downtrend line at the RM1.50. A break above RM1.50 could signal the continuation of its prior uptrend.


Chart: Onastel's weekly chart as at December 31 (courtesy of Quickcharts)

Pohuat's net profit increased further

Poh Huat Resources Holdings Bhd ('Pohuat') is involved in the manufacture & sale of furniture. Its manufacturing operations are located both in Malaysia and Vietnam.

On December 31st, Pohuat reported its results for QE31/10/2007 (or, 4Q2007), where its net profit increased by 74.0% q-o-q or 50.1% y-o-y to RM8.0 million. Its turnover has increased by 14% to RM107 million from a year ago, though it is hardly changed from the preceding quarter.

The increased turnover in the last 2 quarters is attributable to higher output from its Vietnam factories (and, maybe benefiting from positive seasonal effect as group's turnover is normally higher in the 3rd & 4th quarters). With higher capacity utilization & better production efficiency achieved by its Vietnam operations as well as a change in product mix (that emphasized higher profit margin products), the group's net profit was given a big boost.

If Pohuat can maintain its current level of profitability, its earning may increase to 20-30 sen per share in FY2008. Assuming a EPS of 25 sen for FY2008, Pohuat is now trading at a forward PE of 3.7 times (basing on its price of RM0.915 as at 11.00 am today).



The monthly chart shows that Pohuat has broken above its long-term downtrend line at the RM0.63-65 as well as the horizontal resistance of RM0.75. The next horizontal resistance is at RM0.95.


Chart: Pohuat's monthly chart as at December 31 (courtesy of Quickcharts)

Based on improved financial performance & bullish technical breakout, Pohuat could be a good medium-term BUY.