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Friday, November 28, 2008

CPO set to rebound

CPO may have put in a short-term bottom based on two observations- firstly, the Parabolic SAR (short for 'stop-and-reversal' indicator) has moved below the price, and secondly, the 20-day SMA (the middle line within the Bollinger Bands) has finally flattened out & poised to move upward (see Chart 1 below).


Chart 1: CPO's daily chart as at November 27, 2008 (source: ifs.marketcenter.com)

In the past few months, CPO price movement correlates very well with Crude Oil price movement as well as the movement in CRB Index. From Chart 2 & 3 below, we can see that both Crude Oil & CRB have also staged some recovery.


Chart 2: CRB Index's daily chart as at November 27, 2008 (source: Stockcharts.com)


Chart 3: WTIC's daily chart as at November 27, 2008 (source: Stockcharts.com)

On the other hand, CPO price movement has an inverse correlation to the movement in the USD Index. From Chart 4 below, we can see that the USD index has broken below its short-term uptrend line (SS2) support at 87.5 & it may soon test its medium-term uptrend line (SS) support at 80.5-81.0 level. What could be spooking the USD? Answer: The bill for rescuing the US financial system has just surpassed USD8 Trillion! (go here).


Chart 4: USD Index's daily chart as at November 27, 2008 (source: Stockcharts.com)

Further weakness in the USD could spur a strong rebound in many commodities, including our CPO. This in turn would be positive for plantation stocks. The CPO prices could rally much higher if the USD were to break below its medium-term uptrend line. However, one would not want to see the latter scenario happening because it could only mean that the USD has been debased to such an extent that investors began to turn away from this safe haven. It could also signal the end of the present US-dominated global financial system and without a clear successor in place (read: Bretton Wood 2) the world could be a very dangerous place indeed.

Genting incurred a net loss of RM40 million for 3Q2008

Genting has just announced its results for 3Q2008 ended 30/9/2008, where it reported a net loss of RM40 million as compared to a net profit of RM291 million recorded in 1Q2008 or RM275 million achieved in 3Q2007. Turnover increased by 9.7% q-o-q or 6.5% y-o-y to RM2.37 billion.

The poorer results was attributable to lower profit from core divisions [such as Power division (due to higher cost of coal); Plantation division (due to lower prices for FFB); and Leisure & Hospitality division (due to poorer results from both Genting Highlands Resort & UK casino operations)] as well as impairment loss of RM396.3 million (which includes goodwill write-off of RM236.0 million by Genting International arising from its acquisition of Genting Stanley, UK and an impairment loss of RM55.2 million from the Group investment in power plants in China).



From the monthly chart (Chart 1), we can see that Genting has tested its long-term uptrend line support at RM3.60 in October. Presently, Genting's share price is in a medium-term downtrend with resistance at RM5.70-80 (see the weekly chart, Chart 2). With the poor results just announced, there is a possibility that the share price will drop back to re-test the 'low' of RM3.58-60 again.


Chart 1: Genting's monthly chart as at Nov 27, 2008 (source: Quickcharts)


Chart 2: Genting's weekly chart as at Nov 27, 2008 (source: Quickcharts)

I believe that Genting could be a good stock for long-term investing. A good entry level could be between RM3.60-80.

WTK's top-line & bottom-line improved further

WTK has announced its results for 3Q2008 ended 30/9/2008, where its net profit increased by 35.7% q-o-q or 94.5% y-o-y to RM25.9 million while its turnover increased by 7.9% q-o-q or 46.2% y-o-y to RM244 million. The increased turnover & profit was attributable to continued improvement in timber prices.



WTK (closed at RM1.05 yesterday) is now trading at a PE of 8.1 times (based on last 4 quarters' EPS totaling 13 sen) or a Price to Book of 0.43 times (based on NTA per share of RM2.47 as at 30/9/2008). At these multiples, WTK may not appear cheap. If the recovery in timber prices can sustain, WTK's earning can improve further.

As noted in another post, WTK's share price has broken below the all-time 'low' of RM1.28-30 in the middle of last month. Since then, the share price has been hovering between RM1.00-1.12.


Chart 1: WTK's monthly chart as at Nov 27, 2008 (source: Quickcharts)


Chart 2: WTK's daily chart as at Nov 27, 2008 (source: Quickcharts)

Based on steady improvement in its financial performance, I believe WTK is a good stock for long-term investing.

Proton etched out a small net profit for 2Q2009

Proton announced its results for 2Q2009 ended 30/9/2008, where its net profit dropped 16% q-o-q to RM43.8 million on the back of a 7.6%-increase in its turnover to RM1.84 billion. Compared the previous corresponding quarter, Proton's net profit is up eleven folds while turnover is up 41%. Despite the improved performance, Proton's profitability is very tentative. Its revenue for 2Q2009 is the same as its operating expenses of RM1.84 billion, while for the 1H2009, revenue totaling RM3.55 billion exceeds operating expenses by RM12 million. The fact that Proton has managed to report net profit of RM43.8 million for 2Q2009 [& RM95.8 million for 1H2009] was due to Other Operating Income of RM53.3 million [& RM97.4 million for 1H2009] and Share of Results from Associates & JVs of RM8.0 million [& RM12.8 million for 1H2009].



As noted in my previous post (here), Proton made a new all-time low of RM1.60 on November 24. The share price has however recovered somewhat over the past three days and the feared selldown did not materialize.


Chart: Proton's daily chart as at Nov 27, 2008 (source: Quickcharts)

Based on the poor technical outlook & unconvincing financial performance, I think it is best to avoid Proton, given the availability of many attractive stocks to choose from.

Note: Proton has finally renewed the contract of Proton’s managing director, Dato’ Haji Syed Zainal Abidin Syed Mohamed Tahir.

Thursday, November 27, 2008

Resorts dropping with big volume

As at 3.45 pm, Resorts dropped 23 sen to RM2.42, with volume hitting 59 million units! What could have prompted such a big selldown?

Firstly, Resorts announced its results for 3Q2008 ended 30/9/2008, where its net profit dropped 11.4% q-o-q or 49.0% y-o-y to RM340.6 million while turnover was down 1.3% q-o-q but up 9.8% y-o-y to RM1.225 billion. The sharp drop in net profit vis-a-vis the previous corresponding quarter was due to an exceptional gain of RM337 million recorded last year from the disposal of investment in Star Cruises. If this exceptional gain were excluded, Resorts' net profit would have increased by 3.0% when compared to the previous corresponding quarter.



Secondly, Resorts has also announced a sizable acquisition yesterday. It has acquired 100%-stake in Bromet Limited (“Bromet”) and Digital Tree (USA), Inc. (“DT Inc”) for a total cash consideration of USD69.0 million (approximately RM249.8 million).

Resorts made this acquisition in order to have a stake in Walker Digital Gaming LLC (“WDG”), a 10%-owned investee company, and Digital Tree LLC (“Digital Tree”), a wholly-owned subsidiary, both within the Acquiree Groups. The business of WDG (from whom Digital Tree solely derives its revenue) is in the development, protection and commercialisation of gaming-related Patents.

In addition, the vendor [KH Digital Limited (“KHD”)] has granted a call option to Resorts for a cash consideration of USD1.00 to acquire, within a period of 18 months from the date of the Call Option Agreement, the entire issued and paid-up share capital of Karridale Limited (“Karridale”) at an exercise price of USD27.0 million (approximately RM97.8 million). The main asset of Karridale is its 100% equity interest in Faargy Limited (“Faargy”), which owns the 10% non-voting equity interest in Walker Digital Lottery LLC (“WDL”). WDL is principally involved in the development, protection and commercialisation of Patents attributable to the lottery industry.

In short, Resorts has acquired 10%-stake in WDG, which is into the development, protection and commercialisation of gaming-related Patents, for USD69 million & has an option to acquire a 10%-stake in WDL, which is into the development, protection and commercialisation of Patents attributable to the lottery industry for US27 million. Without looking at the numbers, it is hard to form an opinion on whether the acquisition was done at a good price and to add to the value of the company. However, the business of the acquiree companies seems like a good fit for Resorts & it is likely that Resorts made this acquisition at a good price, since it is a buyers' market now. In the present market, a company with deep pocket, such as Resorts, will be able to pick up good bargain (see this article from the Edge newsletter). I would be neutral on the acquisition given the lack of information about WDG & WDL.

Chartwise, Resorts has broken above its downtrend line. It has good horizontal support at RM2.40-42.


Chart: Resorts' daily chart as at Nov 26, 2008 (source: Tradesignum.com)

Based on positive technical outlook, I think Resorts could be a trading BUY at the present level of RM2.42.

Harison's net profit eased off somewhat

Harison has just announced its results for 3Q2008 ended 30/9/2008. Its bet profit dropped 12.1% q-o-q to RM6.7 million on a 4.2%-decline in turnover to RM261 million. Nevertheless, Harison's net profit increased by 66.5% from that of the previous corresponding quarter, while turnover was 6.4% higher for the same period.



In August 2008, Bumi Raya International Holding Company Ltd ('BRI') made an conditional offer to acquire all the shares of Harison at RM1.20 per share, which was subsequently revised to RM1.45 per share. Even after this revision, BRI was only able to increase its shareholdings from about 26% to 46.5%. As the acceptance rate fell short, the takeover was aborted (go here for the Bursa announcement). The low acceptance rate was somewhat surprising since the shareholding of Harison is quite spread out, with only 2 other substantial shareholders, i.e. one Dato Mohamed Nazri (owning 7.35%) & one Lim Soon Tham (owning 9.52%).

Harison (closed at RM1.20 yesterday) is trading at a trailing PE of 2.9 times (based on last 4 quarters' EPS totaling 42 sen) or at a Price to Book of 0.4 times (based on a NTA per share of RM3.12 as at 30/9/2008). In addition, the stock has a dividend yield of 6.25%. At these multiples, Harison is deemed very attractive. No wonder the shareholders rejected the BRI offer, even at RM1.45!

Chartwise, Harison is a bore! Its share price has been adrift for the past 8 years; trading between RM1.00 & RM1.60. If not for the BRI offer, the share price was trading in the tight range of RM1.20-1.40.


Chart: Harison's monthly chart as at Nov 26, 2008 (source: Quickcharts)

Harison is a very attractive stock for long-term investing. Its potential to generate an substantial capital gain in the near-term is however quite low.

Wednesday, November 26, 2008

Masteel's net profit peaked

Masteel has announced its results for 3Q2008 ended 30/9/2008. Its net profit increased by 46.9% y-o-y to RM16.7 million on the back of a 71.5%-increase in turnover to RM264 million. When compared to the immediate preceding quarter, net profit was 55.9% lower while turnover has declined 5.9%.



In the note to its account, Masteel stated that "(t)here are indications of the bottoming out of the steel prices in late October and the prices have begun to rebound". From Mysteel.net, I have extracted the charts of 2 steel products, i.e. CR Sheet & Rebar which indicate that the prices of these products are finding some support.



Masteel (closed at RM0.69) is now trading at a trailing PE of 1.5 times (based on its last 4 quarters EPS totaling 47 sen) or at a Price to Book of 0.3 times (based on NTA of RM2.18 per share as at 30/9/2008). While many analysts expect Masteel's earning to drop sharply in line to the drop in the prices of steel products, it is likely that Masteel's relatively smaller operation- with lower overhead- will enable it to better withstand this challenging times.

From the daily chart (Chart 1), we can see Masteel is now testing its downtrend line resistance at RM0.70. The immediate horizontal support is at RM0.65. A break of this support level could see the stock testing its strong horizontal support at RM0.55 (see the week chart, Chart 2).


Chart 1: Masteel's daily chart as at Nov 25, 2008 (source: Quickcharts)


Chart 2: Masteel's weekly chart as at Nov 25, 2008 (source: Quickcharts)

While it is too early to expect Masteel's share price to trend higher, the current price is very attractive. If the indication of a bottom in steel prices proves to be accurate, then we should be able to see a recovery in Masteel's net profit & turnover in the next quarter. Masteel is a stock worth tracking for a recovery play.

Tuesday, November 25, 2008

Media's net profit improved

Media has just announced its results for 3Q2008 ended 30/9/2008. Its net profit increased by 9.4% to RM33.6 million over the preceding quarter while turnover was 7.9% higher at RM214 million. When compared to the previous corresponding quarter, net profit dropped by 25.3% despite an unchanged turnover. The later was attributable to higher advertising expenditure in 3Q2007, due mainly from the 50th Merdeka celebrations.



Media (closed at RM0.93 yesterday) is now trading at a PE of 6.6 times (based on last 4 quarters' EPS totaling 14 sen) or at a Price to Book of 1.5 times (cased on NTA of RM0.64 per share). At these multiples, Media is very attractive.

Media's share price has been dropped after making a high of RM3.20. The downtrend accelerated in May 2008. A break above the accelerated downtrend line resistance at RM1.10 could be the beginning of a bottoming process for this stock.


Chart 1: Media's weekly chart as at Nov 24, 2008 (source: Quickcharts)


Chart 2: Media's monthly chart as at Nov 24, 2008 (source: Quickcharts)

Being the largest media company in Malaysia, Media has very promising prospects. With its steady financial performance & attractive valuation, Media should be a good stock for long-term investing.

NSTP tested its 1998 low

NSTP has just announced its results for Q2008 ended 30/9/2008. Its net profit increased by 46.7% q-o-q or 23.3% y-o-y to RM16.1 million, while turnover was relatively unchanged at RM149 million. The sharply higher net profit was attributable to higher advertisement revenue, higher share of profit from associates & an exceptional gain of RM4.7 million from disposal of property.



NSTP (closed at RM1.05 yesterday) is now trading at PE of 4.8 times (based on last 4 quarters' EPS totaling 22 sen) or at a Price to Book of 0.2 times (based on NTA of RM4.50 per share). At these multiples, NSTP is deemed very attractive.

NSTP share price has been drifting lower since making an all-time high of RM18.60 in March 2000 (courtesy of the dotcom bubble). Its most recent rally of any significance was in November-December 2006 when the share price peaked off at RM3.20. Recently, NSTP hit a low of RM0.99 on October 29 & again at RM0.995 on November 20.


Chart: NSTP's monthly chart as at Nov 24, 2008 (source: Quickcharts)

Based on attractive valuation, improving financial performance & strong technical support at RM1.00, I believe NSTP could be a good stock for long-term investing.

Jobst's net profit inched higher

Jobst has just announced its results for 3Q2008 ended 30/9/2008, where its net profit increased by 28% q-o-q or 30% y-o-y to RM11.6 million. Turnover increased by 27% y-o-y to RM27.6 million, but was only marginally higher than the preceding quarter's turnover of RM27.3 million.



Jobst's share price has drifted back to its long-term uptrend line support of around RM1.20.


Chart: Jobst's monthly chart as at Nov 24, 2008 (source: Quickcharts)

Based on continued healthy financial performance, attractive valuation & nice technical picture, I believe Jobst is good stock to add to your portfolio.

Monday, November 24, 2008

Random Thoughts

A few thoughts crossed my mind. Firstly, most Asian stock markets did not make a new 'low' last week vis-a-vis October 'low', unlike the US markets. Only a few markets made lower 'lows' in November- among them are Australia & Canada.

The outlook is now extremely bearish, with analysts, economists & columnists warning about the world slipping into a sharp recession or deflation, while the word 'depression' is also being bandied about. The first blogger of good standing who made the call that we have entered a depression is David Merkel of the Aleph Blog (go here).

Seriously big problems are now coming out of the woodwork. Before the problem of the Detroit automakers can be discussed fully, Citibank came knocking. In record time, Citibank was bailed out (go here). Now, the Fed appears to be shifting to quantitative easing, or otherwise known as the nuclear option (go here). The laymen in the street can only wonder- when is this nightmare going to end?

Friday, November 21, 2008

Interesting Links

I have provided a few interesting links for your reading pleasure.

1. Even Berkshire Harthaway is not immune in the current crisis. (Clusterstocks & FT Alphaville)

2. Prince Alwaleed wasn't so luck the second time around. (Clusterstocks)

3. Goldman gave up guessing Crude Oil prices (Clusterstocks)

4. The bottom is broken through (Jason Kelly) but don't worry about it. (Paul Krugman)

5. Where's the Plunge Protection Team when you really need them? (Big Picture)

6. Belated downgrades... who needs them? (Big Picture)

7. Top Down or Bottoms Up? (FT Alphaville)

8. As if the Shippers do not have enough problems, now they have to take out piracy insurance. (Clusterstocks) Maybe not for long... Like Popeye the Sailor Man said "That's all I can stands, and I can't stands no more." (BloggingStocks)

9. In case you haven't read it, Joachim Fels of Morgan Stanley doesn't think US will enter into a depression, nor go the way of Japan. (Morgan Stanley)

10. For those who worry about the unstoppable dollar rise, this one maybe comforting thought. (FT Alphaville)

Finally, two comic strips that capture accurately the problems faced by stockbrokers (or, remisiers)...


Stock Market Rollercoaster by Paul Zanetti
via the Big Picture

... and, those planning for their retirement. Ouch!!!


via Randy Glasbergen

KFC's top-line & bottom-line still growing

The noticeable slowdown in restaurant business has not affected the performance of KFC, the biggest fast food chain in Malaysia. Its results for 3Q2008 ended 30/9/2008 shows that its net profit has increased by 3.4% q-o-q or 20.0% y-o-y to RM31.5 million. Its turnover has also increased by 4.3% q-o-q or 28.9% y-o-y to RM552 million.



KFC (closed at RM6.90 yesterday) is now trading at a trailing PE of 11 times (based on its last 4 quarters' EPS totaling 61 sen) or a Price to Book of 2.0 times (based on its NTA of RM3.40 per share as at 30/9/2008). At these multiples, KFC is still attractive.

From Chart 1, we can see that KFC's share price has been trading within a wide range between RM5.50 & RM7.50.


Chart 1: KFC's weekly chart as at Nov 20, 2008 (source: Quickcharts)

While KFC is clearly in a long-term uptrend line (with support at RM4.00), the immediate medium-trend line support is at RM5.50 (see Chart 2 below). The sharp spike-up in the share price could be due to window-dressing activities by some local funds. At the same time, there were some sharp spike-down. Could these be linked to price manipulation by parties who wished to gather control of this company?


Chart 2: KFC's monthly chart as at Nov 20, 2008 (source: Quickcharts)

The biggest negative for KFC is its related parties transactions. In the past 2 years, there were a few occasions where it had acquired assets from the related companies at prices that analysts found to be on the high side. Despite consternation among investors, these transactions still occurred. As a result, KFC may not be well-owned by institutional investors. This may serve the interest of KFC's major shareholder, QSR (& the ultimate shareholder, Johor Corp), since QSR is known to be quite intent on taking KFC private.

In conclusion, KFC is a good defensive stock for long-term investing. It is trading at an attractive price. However, it has a big drawback in term of related parties transactions.

Kossan's net profit increased in 3Q2008

Kossan's net profit for 3Q2008 ended 30/9/2008 increased by 9.2% q-o-q or 22.5% y-o-y to RM15.3 million, while its turnover increased by 9.2% q-o-q or 26.0% y-o-y to RM237 million.



Kossan (closed at RM2.35 yesterday) is now trading at a trailing PE of 5.5 times (based on last 4 quarters' EPS totaling 42.5 sen) or at a Price to Book of 1.3 times. At these multiples, Kossan is very attractive.

For the monthly chart, see below.


Chart: Kossan's monthly chart as at Nov 20, 2008 (source: Quickcharts)

Thursday, November 20, 2008

Maybulk survived another quarter

After the sharp plunge in shipping rates (since June this year), investors have been anxiously awaiting the announcement of Maybulk's results for 3Q2008 ending 30/9/2008.


Chart 1: BDI's daily chart as at Nov 19, 2008 (source: InvestmentTools.com)

The results has just been announced & it is a surprisingly respectable performance. Its turnover increased by 16% q-o-q or 32% y-o-y to RM217 million. Net profit increased by 24% to RM143 million from RM115 million recorded in the previous corresponding quarter. When compared to the preceding quarter, net profit has declined by only 35%.

While Maybulk has enjoyed a gain of RM159 million from the disposal of a product tanker (Alam Comel), it has also suffered from unrealized losses from its investment in quoted securities amounting to RM62 million.



A closer look at the revenue table (below) shows that Maybulk was able to enjoy shipping rates in 3Q2008 that were higher than those in 2Q2008. How did Maybulk manage to secure such high shipping rates? One possible answer is that it has entered into long-term charter at higher rates than the prevailing spot rates, before the market downturn. When would these charters end? Would the counter-parties back out of such charters when the prevailing spot rates are nearly 90% lower?



From Chart 2 below, we can see that Maybulk's share price has slid off a lot since making a high of RM5.45 in November 2007. The stock has recently broken below its strong horizontal support of RM2.45 & it may drift lower to test its long-term uptrend line support at RM1.92-2.00.


Chart 2: Maybulk's monthly chart as at Nov 19, 2008 (source: Quickcharts)

The management of Maybulk has done a very good job. With the sharp downturn in shipping rates- brought on by the global economic slowdown- the true test is still ahead. For those who have the stock, I think you may hold onto it since the share price has dropped to such a low level. For those looking to buy, I think you should wait for another 1 or 2 quarter(s) for more clarity.

Pelikan- how low can it go?

Pelikan has just announced its results for 3Q2008 ended 30/9/2008, where its net profit dropped by 64% q-o-q or 29% y-o-y to RM15.8 million. Turnover increased by 14% y-o-y to RM340 million from RM299 million previously, but was lower than the preceding quarter's turnover of RM407 million. The drop in Pelikan's financial performance for 3rd quarter vis-a-vis its 2nd quarter was due to seasonality factor, where its stationery business would normally receive a boost from “back to school” sale in Europe in the middle of the year.



Pelikan's share price rose from RM0.65-70 in 2004 to a high of RM5.80 in July 2007. Since then, the share price has been sliding off. It made a recent low of RM1.11 on October 30th, before rebounding. Yesterday, the share price surpassed the recent low to close at RM1.07. The monthly chart is attached below.


Chart: Pelikan's monthly chart as at Nov 19, 2008 (source: Quickcharts)

Based on its closing price of RM1.07 yesterday, Pelikan is now trading at a PE of 4.3 times (using its last 4 quarters' EPS totaling 25 sen). In addition, it is trading at a Price to Book of only 0.57 times (using its NTA per share of RM1.89 as at 30/9/2008). At these multiples, Pelikan is deemed very attractive.

As such, Pelikan could be a good defensive stock for long-term investing.

S&P500 broke through its 845-850 horizontal support

The S&P500 has finally broken below its recent low of 845-850. This breakdown, coupled with negative reading of the indicators (such as, MACD crossed down, ADX hooked up & William %R stuck in negative territory), would mean further downside for the US stock market (see Chart 1 below).


Chart 1: S&P500's daily chart as at November 19, 2008 (Source: Stockcharts.com)

S&P500 may find support at its 2002 low at 770 (see Chart 2 below).


Chart 2: S&P500's daily chart for 10 year to November 19, 2008 (Source: Yahoo Finance)

If you look at Chart 3 below, which plots the S&P500 from 1950 until today, you will see that S&P500 cyclical lows have rarely approached the preceding lows. This has happened on 2 previous occasions, i.e. 1962 (denoted as 'A') & 1974 (denoted as 'B'). Of these occasions, only in 1974 did the S&P500 made a low that was lower that the preceding low. As such, we can expect the S&P500 to find support at 770 & stage a rebound from there. Failure is not an option.


Chart 3: S&P500's daily chart for 58 year to November 19, 2008 (Source: Yahoo Finance)

Wednesday, November 19, 2008

Proton made a new all-time low

Proton lost 17 sen to close at RM1.73 today. The last 3 days Proton had been struggling to close above its all-time low of RM1.88 recorded in September 1998. What could be the cause(s) of this selldown? Could the selldown be induced by GM bankruptcy mania? (go here) Could it be bad news ahead for Proton? Bad news that might warrant the non-renewal of the employment contract of its existing CEO (go here & here).

Whatever the reason, we must be very cautious & avoid catching this falling knife.


Chart: Proton's monthly chart as at Nov 18, 2008 (source: Quickcharts)

Aji's net profit declined slightly

Ajinomoto (M) Bhd ('Aji') is involved in the manufacture & sale of natural flavour food enhancers. It has just announced its results for 2Q2009 ended 30/9/2008, where its net profit declined by 6.6% q-o-q or 8.7% y-o-y to RM5.6 million. This was despite improved turnover which increased by 10.6% q-o-q or 20.8% y-o-y to RM63.7 million. The drop in the bottom-line was attributed to higher input costs.



The valuation of Aji is quite attractive. Based on yesterday's closing price of RM2.25, Aji is now trading at a trailing PE of 6.4 times (using last 4 quarters' EPS totaling 35 sen). In addition, Aji is trading at a Price of Book of 0.77 times (based on its NTA per share of RM2.93 as at 30/9/2008). Aji's dividend yield is also very attractive at 6.7% (based on 15 sen dividend paid out for FY2008).

Chartwise, Aji share price has been drifting lower after making a recent high of RM2.72 in August this year. The share price is barely holding onto its medium-term uptrend line support at RM2.15-18. A break of this support could send the share price to RM2.00.


Chart: Aji's weekly chart as at Nov 18, 2008 (source: Quickcharts)

Aji is a defensive consumer stock. Based on good financial performance & attractive valuation, it could be a good stock for long-term investing.

Tuesday, November 18, 2008

TChong reported strong growth in top-line & bottom-line for 3Q2008

TChong has just announced its results for 3Q2008 ended 30/9/2008, where its net profit increased by 40% q-o-q or 188% y-o-y to RM95.4 million. Turnover jumped by 28% q-o-q or 69% y-o-y to RM1.00 billion.

Looking at the table below, we can see the big change in the results for the last 4 quarters when compared to the preceding 4 quarters. Turnover increased by 61% from RM1.85 billion to RM2.99 billion, while net profit increased by 247% from RM72 million to RM250 million. TChong experienced 2 big leaps in the past 9 months. The first leap was in 1Q2008, when it introduced its Nissan Grand Livina model. The next leap was in 3Q2008 when it introduced its Nissan Sylphy model. Because of these new models, TChong's share of Malaysian's Total Industry Volume ('TIV') increased from 3.8% to 5.2%. With bigger volume comes economies of scale, which helped to push TChong's net margin from 7.1% in 1Q2008 to 8.7% in 2Q2008 & 'nearly 10%' in 3Q2008.



There are signs that the growth in the TIV has begun to slowdown in August, against the backdrop of global economic crisis. TChong is not expected to escape from this economic crisis. Sales of durable goods, such as automobiles, are likely to drop during this period.

However, I believe the market may have over-discounted the drop in TChong's earning. From Chart 1 below, we can see that TChong's share price is now at the 'low' recorded in 2007. It is now testing its strong horizontal support of RM1.15. A break of that horizontal support could send the stock to the next strong horizontal support of RM1.00 (see Chart 2).


Chart 1: TChong's weekly chart as at Nov 17, 2008 (source: Quickcharts)


Chart 2: TChong's monthly chart as at Nov 17, 2008 (source: Quickcharts)

At yesterday's closing price of RM1.15, TChong is now trading at a trailing PE of 3.1 times (based on last 4 quarters' EPS of 37 sen). If we assumed that TChong's earning were lower by 50% to 18 sen over the next 1 year (due to poor economic outlook), then TChong would still be trading at a relatively inexpensive PE of 6.2 times. In addition, its Price to Book is equally undemanding at 0.55 times (based on NTA of RM2.10 per share as at 30/9/2008).

Based on strong financial performance, attractive valuation & good technical support, TChong could be a good BUY for long-term investing.

Monday, November 17, 2008

SSECI poised to test its downtrend line

SSECI gained 44 points (or, 2.22%) to close at 2030.48 today. This means that SSECI is poised to test its medium-term downtrend line, at the 2050 level as early as tomorrow. A breakout above 2050 would mean the end of the current downtrend. Two scenarios may happen, i.e. the SSECI will go sideway & a bottoming phase will take place. An alternative more bullish scenario may also happen, whereby the SSECI may commence immediately in an uptrend. The latter scenario is less likely given the weaknesses in China's main export market (i.e. the US) as well as the poor outlook of China's domestic economy (read: rising unemployment & fast-deflating property burble). Whatever the case, a breakout of a downtrend in SSECI is something to be welcomed, if it happened.


Chart: SSECI's daily chart as at November 14, 2008 (Source: Stockcharts.com)