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Friday, May 29, 2009

Taking a short break

I'll be taking a short break for the next few days. I should be back in action by the middle of next week.

Airasia- the recovery begins?

Airasia has just announced its results for 1Q2009 ended 31/3/2009. Despite a q-o-q 13.8%-drop in its turnover from RM828 million to RM714 million, Airasia managed to turnaround from a net loss of RM177 million in 4Q2008 to report a net profit of RM203 million in 1Q2009. This is because Airasia suffered an exceptional loss of RM426 million in 4Q2008 due to the cost of unwinding fuel derivative & interest rate swaps. For FY2008, Airasia suffered exceptional losses totaling RM1.069 billion from the same sources as well as the loss of collateral held by the now-defunct Lehman Brothers.


Table 1: Airasia's 8Qs

Table 2 below revealed that Airasia's Load Factor of 70% for 1Q2009 is lower 1Q2008 (of 72%) or 4Q2008 (of 78.4%). Despite the drop in Load Factor & Average Fare (from RM229 in 4Q2008 to RM198 in 1Q2009), Airasia was able to increase its EBITDAR margin from 42.6% in 4Q2008 to 44.1% in 1Q2009. As a result, it was able to maintain its Core Operating Profit margin at about 23%.


Table 2: Airasia's Key Statistics for 1Q2009, 4Q2008 & 1Q2008

Looking at Chart 1 below, we can see the steady growth in Airasia's turnover, which reflects its aggressive expansion program. Its profits track record was unable to keep up with its turnover growth due to exceptional items, as mentioned earlier.


Chart 1: Airasia's past 12-quarters' turnover & profits

Airasia has broken above the strong horizontal resistance of RM1.25-26 in the past few days. The next resistance will be at RM1.40 and thereafter at RM1.50 & RM1.60.


Chart 2: Airasia's weekly chart as at 28/5/2009 (Source: Quickcharts)

Based on improving performance & mildly bullish technical outlook, Airasia could be a good trading BUY.

Airport to maintain its steady growth

Airport has just announced its results for 1Q2009 ended 31/3/2009. Compared to the previous corresponding quarter (1Q2008), net profit was unchanged while turnover has increased by 4.2%. However, the net profit increased by 61% q-o-q to RM91.9 million on a 7.7%-increase in turnover to RM392 million. The increased turnover was attributable to growth in aeronautical revenue of 19.2% & non-aeronautical revenue of 14.7%. The increased profits was attributable mainly to reversal of provision for lease rental.



The steady rise in Airport's turnover & profits over the past 12 quarters can be clearly seen in the chart below.


Chart 1: Airport's past 12-quarters' turnover & profits

I believe 2009 will be a real test on whether Airport can maintain its steady growth. Can Airport build on the strong growth in the non-aeronautical revenue achieved in 1Q2009 as a result of the implementation of a retail optimization plan and provision of more commercial spaces? Similarly, can it maintain the healthy growth aeronautical revenue achieved in 1Q2009, given that passenger movement for 2009 is expected to be sluggish due to the economic slowdown?

In term of valuation, Airport (closed at RM3.48 in the morning session) is now trading at a trailing PE of 12.4 times (based on the last 4 quarters' EPS of 28 sen). At this multiple, Airport is still deemed fairly attractive for the defensive stock.

From the two charts below, we can see that Airport has been rising steadily since the successful financial restructuring was completed in February this year (go here). It has nearly tested its November 2007 of RM3.62 yesterday & today (with high recorded of RM3.60). The all-time high for Airport was RM4.00 recorded on February 9, 2000. The inability to surpass the November 2007 of RM3.62 could result in profit-taking, with the possibility of the share price drifting lower to test the horizontal support of RM3.20 or the medium-term uptrend line support of RM3.00.


Chart 2: Airport's daily chart as at 28/5/2009 (Source: Quickcharts)


Chart 3: Airport's weekly chart as at 28/5/2009 (Source: Quickcharts)

Based on good financial performance & reasonably attractive valuation, Airport could still be a good stock for long-term investing. However, I believe that the stock could see some correction as a result of profit-taking activity after its recent sharp rise. A good entry level would be about RM3.00-3.20.

Thursday, May 28, 2009

Maybulk had a poor 1Q2009

Maybulk reported a poor set of results for its 1Q2009 ended 31/3/2009. Excluding gains or losses from the disposal of vessels, Maybulk reported a pre-tax profit of RM22.2 million as compared to a loss of RM19.9 million in 4Q2008, while turnover was down 62% from RM138 million to RM53 million. The turnaround was attributable to lower net loss from Other Operating Income which dropped from RM26.9 million in 4Q2008 to RM3.6 million in 1Q2009 (due to decline in mark-to-market provisions for equities & foreign exchange) as well as increase in Share of Profit from Associates from RM12.7 million to RM24.1 million (partly due to the inclusion of the results from POSH).

The sharply lower turnover was attributable to lower hire days for both dry bulk tanker segment and a sharp decline in the average dry bulk rate of USD11807 per day (cf. USD28623 per day in 4Q2008). However, the average tanker rate was higher for 1Q2009 at USD19138 per day (cf. USD13546 per day for 4Q2008).



Maybulk may benefit from the improvement in the dry bulk shipping rates in the next few quarters as the global economy begin to slowly recover. As we can see from Chart 1 below, the Baltic Exchange Dry Index ('BDI') has already started inching higher.


Chart 1: BDI's weekly chart as at May 27, 2009 (courtesy of Investment.tools.com)

While Maybulk has broken above its downtrend line in early-April at RM3.00 level, the rally in the stock may be over since the MACD had crossed under. On weakness, Maybulk may re-test the RM3.00 psychological support. Overhead resistance at the horizontal line of RM3.50 should cap any rise in Maybulk until its financial performance has improved significantly.


Chart 2: Maybulk's weekly chart as at 28/5/2009_3.30pm (Source: Quickcharts)

Based on the poor results for 1Q2009 & weakening technical outlook, I believe Maybulk's medium-term outlook is likely to be negative. A good entry level for this stock is at RM3.00 or even RM2.60-70.

MNRB- the recovery may have started

MNRB's results for 4Q2009 ended 31/3/2009 shows a turnaround after 2 quarters' of losses in 2Q2009 & 3Q2009, where net losses incurred amounted to RM13.3 million & RM13.8 million, respectively. For 4Q2009, MNRB reported a net profit of RM44.1 million- a seven-fold increase over the previous quarter's net profit of RM4.8 million, while turnover inched up from RM280 million to RM284 million. The improvement was attributable to higher underwriting contribution from its reinsurance subsidiary.



Chartwise, MNRB has broken above the accelerated downtrend line as well as the horizontal line at RM3.10. The medium-term downtrend line that stretches back to July 2007 peak of RM5.80 is still intact, with resistance at the RM3.90 level. Before that, MNRB will also face resistance from the horizontal line of RM3.70-80.


Chart: MNRB's weekly chart as at 28/5/2009_3.00pm (Source: Quickcharts)

Based on improved performance (albeit only one quarter) and improving technical outlook, MNRB could be a good stock to accumulate for long-term investing.

Market Outlook as at May 28, 2009

Our market is currently experiencing some correction after making a high of 1060 yesterday. This high is just a tad shy of the overhead horizontal line resistance of 1065. The immediate horizontal line support is at 1038, which was the high achieved on May 7. A break below this level could bring forth more selling. As noted before, the 20-day SMA line has been supportive of the KLCI in the current rally & may do so again. That support for the 20-day SMA line is now at 1022.

While the short-term uptrend is still intact, two negative readings will be noted. Firstly, MACD (calculated based on 'weighted average' instead of the usual 'exponential average') has hooked down since April 21. Secondly, we have noted earlier that the rising index was accompanied by declining volume (cannot be seen in the chart below). These negative readings is a warning that we should be more cautious in this market which has risen nearly non-stop since the middle of March this year.


Chart 1: KLCI's daily chart as at 27/5/2009 (Source: Quickcharts)

The market may be correcting ahead of the mid-term 2-week school holiday that will begin on June 1. In the past, the first half of the school holiday tends to quieter than the second half. If the same holds true for the upcoming holiday, then we may see a dull market next week, to be followed by recovery thereafter.

More thoughts on the market...

On close-up, one can draw an accelerated uptrend line (S1S1) for the KLCI. This uptrend line will have support presently at 1030. A tentative uptrend line (SS) that stretches back to the start of the rally in mid-March will provided support at 970.



Chart 2: KLCI's daily chart as at 28/5/2009_12.30noon (Source: Quickcharts)

Wednesday, May 27, 2009

TGOFFS- another attractive Oil & Gas stock

Background

Tanjung Offshore Berhad ('TGOFFS') is involved in the provision of integrated services to both upstream and downstream activities in the oil and gas industry. We also participate actively throughout the life cycle of the oil and gas fields while focusing on our four (4) core activities such as:-
• Provision of Engineering Equipment and Parts Services;
• Provision of Offshore Support Vessels;
• Provision of Maintenance Services; and
• Provision of Drilling and Platform Services.

Recent Financial Results

TGOFFS has just announced its results for 1Q2009 ended 31/3/2009. Its net profit dropped by 27% q-o-q to RM10.0 million on the back of a 8%-decline in turnover of RM187 million. Compared to the previous corresponding quarter, 1Q2008, its net profit was up 78% while turnover has doubled.

The increase in turnover and profitability levels in 1Q2009 vis-a-vis 1Q2008 are mainly due to the ongoing charter of ten units of offshore support vessels as compared to seven units of vessels previously. In addition, the company managed to secure long term charters for these vessels at favorable charter rates given the tight supply of locally flagged vessels within the industry.

The drop in turnover and profitability levels in 1Q2009 vis-a-vis 4Q2008 is due to ongoing work performed on existing engineering equipment packages that are scheduled for completion in the second half of financial year ending 2009. Hence, the recognition of turnover and net profits for these contracts are expected to be higher in the second half of FY2009.



Valuation

TGOFFS (closed at RM1.31 yesterday) is now trading at a trailing PE of 8.2 times (based on last 4 quarters' EPS totaling 16 sen). At this multiple, TGOFFS looks attractive for an oil & gas counter.

Technical Outlook

TGOFFS has broken above its medium-term downtrend line at RM1.20 about 3 weeks ago. Its immediate horizontal line support is at RM1.20, while resistance can be seen at the psychological level of RM1.50 & the horizontal line of RM1.75.


Chart: TGOFFS' weekly chart as at 26/5/2009 (Source: Quickcharts)

Conclusion

Based on steady financial performance, attractive valuation & improving technical outlook, TGOFFS could be a good Oil & Gas counter to consider for medium-term investing.

Tuesday, May 26, 2009

Sime's 3Q2009 offers no cheer

Sime has just announced its results for 3Q2009 ended 31/3/2009. Its net profit dropped by 46% q-o-q or 86% y-o-y to RM151 million, while its turnover was 13.5% lower than the previous corresponding quarter (3Q2008) but 2.4% higher than the immediate preceding quarter (2Q2009).


Table 1: Sime's last 8 quarterly results

In term of operating & pre-tax profit, we can see that operating profit has improved from RM395 million in 2Q2009 to RM427 million in 3Q2009 due to a drop in corporate expenses of about RM61 million which has more than offset the RM29 million decline in segmental results. Nevertheless, Sime's pre-tax profit dropped by RM80 million due to share of losses from JVs & associates of RM67 million (as compared to a profit of RM19 million previously).


Table 2: Sime's segmental results analysis for the past 3 quarters

I have presented below the movement of Sime's turnover, pre-tax profit, net profit after tax & net profit attributable to shareholders for the past 11 quarters. We can see that the rate of decline in Sime's profits has reduced. The next quarter will see Sime pulling out of its steep dive, which was brought on by the plunge in CPO prices. The strong rally in CPO prices since April should boost Sime's bottom-line in 4Q2009.


Chart 1: Sime's top-line & bottom-line changes over the past 11 quarters

Chartwise, we can see that Sime's share price may have bottomed out in the period from November last year to March this year. Good entry to this stock is at RM6.50-70.


Chart 2: Sime's weekly chart as at May 25, 2009 (Source: Quickcharts)

Based on the latest results, we have yet to see a recovery in Sime's financial performance since the busting of the bubble in CPO prices. However, this should change for the better in 4Q2009 as CPO prices have gained significantly since April this year.

Success- a good long-term BUY

Background

Success Transformer Corp Bhd ('Success') is involved in in the manufacture and sale of electrical apparatus and industrial lighting; the production and sale of metal products (focusing on metal stamping parts and metal casings); manufacture and fabrication of process equipment (such as unfired pressure vessels, heat exchangers, tanks, and silos) & other machinery and parts (including mechanical works, maintenance services, and shutdown works); and hiring and servicing of machinery equipment.

Recent Financial results

Success has just announced its results for 1Q2009 ended 31/3/2009. Its net profit increased by 12.3% q-o-q or 19.5% y-o-y to RM6.1 million while its turnover increased by 8.0% q-o-q or 6.6% y-o-y to RM45.5 million. The improved performance of 1Q2009 vis-a-vis 4Q2008 was attributed to higher sales of process equipment, while the improvement over 1Q2008 was also partly due to higher sales of process equipment as well as additional contribution from Seremban Engineering Sdn Bhd (after Success bought out the remaining 40%-stake in April 2008).



Financial Position

Success' financial position as at 31/3/2009 is very healthy, with current ratio at 2.2 times and gearing ratio at 0.3 times.

Valuation

Success (closed at RM0.81 yesterday, but presently at RM0.865 as at 10.30 am) is trading at a trailing PE of 3.9 times (based on last 4 quarters' EPS totaling 21 sen). At this multiple, Success is an attractive stock.

Technical Outlook

Since hitting a low of RM0.60 in December last year, Success has been inching up slowly. From the weekly chart, we can see that this stock is still in a medium-term downtrend, until it can break above the overhead resistance at RM0.92.


Chart 1: Success' daily chart as at May 25, 2009 (Source: Quickcharts)


Chart 2: Success' weekly chart as at May 25, 2009 (Source: Quickcharts)

Conclusion

Based on good financial performance & position, Success is a good stock for long-term investment. However, its technical outlook has not turned positive yet as its medium-term downtrend is still intact. Good entry level is at RM0.75 (near its 50-day SMA line).

Monday, May 25, 2009

A "stoopers' market"?

Jeffrey Saut, the chief investment strategist at Raymond James, writes a very insightful column on US stocks every week (go here). If you are interested in tracking US stocks, you should not miss his column. His column dated May 21 is no exception. Entitled "Special Strategy Alert", Jeffrey is of the opinion that "the equity markets are forming at least a near- to intermediate-term TOP" and that we should be cautious. He feels that the US stock market is presently a "stoopers' market". What does he mean by "stoopers' market":
Yet the current environment feels like a “stoopers’ market” to us. Verily, I first heard about “stoopers” when I accompanied my father to a horse racetrack in Northville, Michigan. I was young and the time between horse races was some 30 minutes, which was pretty long for an eight year old. Consequently, while the adults were contemplating the “betting odds” of the next race, I was watching the “stoopers.” Subsequently, I asked my dad, “What are the people doing that are bending over and picking up the castaway betting tickets that litter the floor?” His response was, “They are called stoopers and they are collecting the discarded betting tickets in hopes that some unknowing soul will throw away a winning ticket because he/she doesn’t understand the intricacies of betting.” And that, ladies and gentlemen, is what the current stock market environment “feels” like to me – a stoopers’ market – in that most of the participants that missed the “lows” back in early March are now bending over looking for the “winning tickets” the unobservant players have missed. The only problem is the observant players have already made their money and have hedged, or sold, their gains in anticipation that the “easy money” is over.

Regrettably, that is where we find ourselves. For example, our recommendation of restaurant analyst Brian Elliott’s “scorched earth” portfolio in early March has gained more than 100%. Therefore, we have advised those folks that heeded that “buy recommendation” to sell half of said portfolio to realize those gains; and, then NOT be afraid to be right on the remaining half of that four-stock portfolio’s ability to potentially achieve another 100% gain. Unfortunately, too few investors listened and only now are looking to lever portfolios into “long” positions. And all we can say to that is that if you are going to buy something right here, only buy partial positions, and then only buy something that is unlikely to hurt you too badly if the equity markets correct by one-third.

Jeffrey had expressed a sentiment that is widely shared by most fund managers & investors who have been scouting around for good stocks as the market rallied higher. The truth is most stocks are no longer trading at cheap valuation, nor are they trading at their fair value. At the current stage of economic recovery, I do not believe that shares should be trading at their fair value just yet.

Meanwhile, we shall note that the technical readings are still positive; albeit bearish divergence is seen between a rising KLCI & a declining volume. Jeffrey's advice on taking some profit is sound. Equally sound is his advice to those who are trying to get into the market now, i.e. to select good defensive stocks that should weather a downturn in the market. The emphasis (in Jeffrey's recommendation) is mine.


Chart: KLCI's daily chart as at 25/5/2009 (Source: Tradesignum)

Friday, May 22, 2009

TM- money can't buy you love

TM has just announced its results for 1Q2009 ended 31/3/2009. Its net profit dropped 83% q-o-q or 95% y-o-y to RM28 million. Turnover was up 5% to RM2.1 billion from RM2.0 billion in 1Q2008, but was lower than the preceding quarter's turnover of RM2.5 billion. To get a clearer picture of TM's performance, I have presented TM's net profit from its current operation as well as profit from its discontinued operation (which has been spun off as Axiata [formerly known as TMI]). The last 8 quarters' results are presented in a table form as well as in a line chart.


Table 1: TM's 8 quarterly results


Chart 1: TM's last 8-quarter performance (in line chart)

From the above line chart, we can see clearly that TM's turnover has been flattish, except for the sudden jump registered in QE31/12/2008. Its pre-tax profit & profit after tax have been declining since QE30/9/2007. The only uptick was in QE31/12/2008, but that was after hefty losses registered in the preceding quarter, QE30/9/2008.

The sharp jump in turnover for QE31/12/2008 was due to data, other telecommunication & non-telecommunication related services. There are no further details on what the last two items are. I guess it does not matter since turnover quickly dropped back in QE31/3/2009. The losses incurred in QE30/9/2008 was attributable to unrealized forex translation loss, realized forex translation loss on disposal of Sotelgui (about RM88.8 million) and prior years volume commitment charges (about RM68.0 million).

From Chart 2 below, we can see that TM's share price has a good run-up from a low of RM2.54 on Nov 13, 2008 to hit a high of RM4.00 on May 19, 2009. The sharp rise could have been driven by the proposed capital repayment of RM0.98 per share announced on Feb 24 this year.


Chart 2: TM's daily chart as at 21/5/2009 (Source: Tradesignum)

What would drive TM's earning in the future? The general perception is that TM's future will be rather unexciting. Its fixed line telephone business has little room for growth. The only new exciting & significant business is the national high-speed broadband costing RM11.3 billion, that will ride on its existing streamyx broadband service (here). Can this new business generate enough income to adequately reward TM's shareholders? TM has a capital base of 3.577 billion ordinary shares, currently valued by the market at RM3.80 apiece; thus giving TM a market capitalization of RM13.593 billion. Only time will tell.

Based on the above, I would reiterate that those who are currently holding onto TM shares should use the opportunity of any price uptick between now & May 26 to reduce your position. You would recall that TM's huge capital repayment of RM0.98 per share will go ex on May 27.

Kossan has a flat tyre

Kossan has just announced its results for 1Q2009 ended 31/3/2009. Its net profit increased marginally by 0.9% y-o-y to RM14.1 million on the back of a 1.2%-increase in turnover to RM202 million. Compared to the preceding quarter, 4Q2008, Kossan's net profit dropped by 10.9% while turnover was lower by 15.2%. The company attributed to the drop in its turnover to a reduction in selling price of gloves in tandem to reduced price of raw materials. From Table 2 below, we can see that the main reason for the drop in net profit was the poor performance of the technical rubber products division. This division produces automotive products, where the demand had dropped off due to the economic slowdown since the fourth quarter of 2008. The depressed demand continued into 1Q2009 & could well drag on for the next couple quarters of 2009.


Table 1: Kossan's 8 quarterly results


Table 2: Kossan's Segmental Analysis for FY2008 & 1Q2009

Based on the above outlook for Kossan's near-term financial performance, we may expect its EPS for FY2009 to be about 36 sen. This is based on the assumption that the recent fire in its Jeram, Selangor plant would not seriously affect its production output. With the earning outlook, Kossan (closed at RM3.60 yesterday) is now trading at a PE of 10 times its current year's earning. Compared with Topglov's current PE of 13 times (share closed at RM6.10 yesterday; FY2009e EPS of 48 sen) & Harta's current PR of 7 times (share closed at RM3.40 yesterday; FY2009e EPS of 48 sen), Kossan is no longer the cheapest rubber glove manufacturer. As such, Harta is now my preferred stock for this sector.

Kossan is still in an uptrend. Despite the poorer results, I believe Kossan's uptrend will remain intact. It has good support on the 10-week SMA line (presently at RM3.30). A break below that could send the stock to either the 30-week SMA or 50-week SMA, which are presently at RM3.00-3.10 level.


Chart: Kossan's weekly chart as at May 21, 2009 (Source: Quickcharts)

Despite the poorer performance, Kossan is still rated as a HOLD based on fairly attractive valuation (for a consumer staples stock) and positive technical outlook.

Thursday, May 21, 2009

CPO correction may start soon

Just 24 hours ago, we have noted that CPO futures for June delivery closed at RM2735 at the end of yesterday's morning session. The same contract closed at RM2586 today, down RM120 from yesterday's closing price (of RM2706). I have pointed out that if CPO "price can hold above RM2600, the CPO price's uptrend is still be intact. A break below that could signal a correction in CPO". We can see from the chart below that the Parabolic SAR (short for 'stop-and-reversal' indicator) has moved above the CPO price. This negative sign could signal the start of the correction in CPO prices.


Chart: CPO's daily chart as at May 21, 2009 (source: ifs.marketcenter.com)

Allianz announced better than expected results for 1Q2009

Allianz has just announced its results for 1Q2009 ended 31/3/2009. Its net profit increased by 14.5% y-o-y but declined 1.2% q-o-q to RM20.2 million. Turnover has increased by 24.2% y-o-y or 1.2% y-o-y to RM495 million. The jump in turnover fro 1Q2009 vis-a-vis 1Q2008 was due to 29%-increase in general insurance gross premium & 19%-increase in life insurance gross premium. At the same time, net profit increased due mainly to underwriting surplus from the general insurance, as a result of premium growth.



Allianz (closed at RM3.60 at the end of the morning session) is now trading at a trailing PE of 7.5 times. At this multiple, Allianz is deemed very attractive.

Allianz has rebounded after making a low of RM2.50 in October last year. With the 10-week SMA crossing above the 30-week SMA, one may conclude that the stock is about to embark on its upleg soon. Good support (& entry level) is at RM3.20-30.


Chart: Allianz's weekly chart as at 20090520 (Source: Quickcharts)

Based on improving financial performance, attractive valuation & positive technical outlook, Allianz is a good stock for long-term investment.

TM- take your profit ahead of the capital repayment

I have recently posted about TM being in a sweet spot because it would be paying out a dividend of 14.25 sen (ex-date: May 20) & a capital repayment of 98 sen (ex-date: May 27) to its shareholders. At that point in time, I was indifferent as to whether one should buy the stock & go through with the two pay-outs or sell just before the ex-date of the capital repayment, but after pocketing the dividend of 14.25 sen (that's to get the capital gain from a higher share price & to forgo the capital repayment of 98 sen).

However, I have now come to conclusion that you should go for the second route after witnessing the recent weakness in TM's share price. Here is my reasoning: I have expected TM's share price to adjust slightly after the ex-date of the dividend of 14.25 sen (ex-date: May 20) because most investors would not sell the share but wait for the capital repayment of 98 sen (ex-date: May 27) or at least realize your capital gain by selling the stock as the May 27 dateline approaches. That was not what happened. The selling after the ex-date of the 14.25 sen dividend was sufficient strong that the share price adjusted downward for almost the entire amount of the 14.25 sen dividend paid off (i.e. dropping from a close of RM3.98 on May 19 to RM3.84 this morning). This is an indication that if you choose to go through with the capital repayment of 98 sen, the share price will adjust downward for the entire amount of the capital repayment of 98 sen to be paid off. Not only that! Looking at how willing are the sellers to dispose off TM presently, I believe that there are some big shareholders who are selling into strength as TM's share price rose ahead of these two payouts. I have a strong feeling that they will not hesitate to sell after the ex-date of the capital repayment of 98 sen even if the share price is lower that the reference price (which is arrived at by deducting 98 sen from the closing price on the last cum date).

Based on the above, I would recommend that you take your profit over the next few days, up to May 26 (the last cum date for the capital repayment of 98 sen). May the best price be yours.


Chart: TM's 15-min chart as at 20090521_11.15am (Source: Quickcharts)

UMW has a disappointing 1Q2009

UMW has just announced its results for 1Q2009 ended 31/3/2009. Its net profit plummeted by 43% q-o-q or 54% y-o-y to RM66 million while turnover dropped by 19.5% q-o-q or 21.3% y-o-y to RM2.35 billion. The lower turnover was attributable mainly to lower sales of Toyota vehicles & heavy equipment. This together with higher cost of sales (resulting from the strengthening of the Japanese Yen and the US Dollar), plus lower profit contributions from our associated companies, led to sharply lower bottom-line for UMW.


Table 1: UMW's past 8 quarterly results

From Table 2 below, we can see the segmental results for 1Q2009 & FY2008. The sharp drop in the segmental results for the automotive division is the main factor dragging down UMW's performance for 1Q2009 & probably for the rest of FY2009.


Table 2: UMW's segmental results for 1Q2009 & FY2008

UMW (closed at RM5.80 yesterday) is now trading at a trailing PE of 13 times (based on last 4 quarters' EPS of 45 sen). On the other hand, if you assumed that UMW's financial performance for FY2009 to be similar to the average of the past 2 quarters' results (with EPS for 1Q2009 & 4Q2008 totaling 17 sen), then UMW's EPS for FY2009 could be about 34 sen. This means that UMW is trading at 17 times its projected earning for FY2009. At this multiple, UMW appears fully-valued.

UMW's share price appears to have bottomed, but its uptrend has not gathered strength. If one were to position for a recovery play, the a good entry level is at RM5.50-60.


Chart: UMW's weekly chart as at 20/5/2009 (Source: Quickcharts)

UMW could be a good stock for long-term investment, based on its historical performance and slowly improving technical outlook.

Efficen's top-line & bottom-line improved slightly in 1Q2009

Efficen has just announced its results for 1Q2009 ended 31/3/2009. Its net profit dropped 3.5% y-o-y to RM4.2 million on the back of a 7.9%-increase in turnover of RM16.4 million. Compared to the immediate preceding quarter, 4Q2008, its net profit actually increased by 23.5% while turnover was up 5.6%. The q-o-q improvement in the turnover & net profit was due to increase in data printing volume from existing customers.



Efficen (closed at RM0.14 yesterday) is now trading at a trailing PE of 5.8 times. At this multiple, Efficen is deemed attractive, given its stable operating environment. However, its share price may continue to trade at this level due to the lack of liquidity in the stock.

Like most penny stocks, Efficen has rallied upward in the past few weeks. Its immediate horizontal resistance is at RM0.18 & RM0.20. Presently, it is resting at the support of RM0.14.


Chart: Efficen's weekly chart as at 20/5/2009 (Source: Quickcharts)

Based on undemanding valuation & improving technical outlook, Efficen is still a good stock for long-term investment.

Wednesday, May 20, 2009

Axiata reported a small profit for 1Q2009

Results Update

Axiata announced its results for 1Q2009 ended 31/3/2009 yesterday. Its net profit dropped 84% y-o-y from RM403 million to RM64 million on the back of a 5.3%-increase in turnover from RM2.72 billion to RM2.87 billion. If viewed from only this angle, then the turnaround story of Axiata would have been lost. Axiata had recovered from a horrendous quarter in 4Q2008 where it incurred a net loss of RM515 million on the back of a turnover of RM2.42 billion. The poor results of 4Q2008 was attributable mainly to adverse currency movement.


Table 1: Axiata's 8 quarterly results

From Table 2, we can see the turnaround in Axiata's Indonesian & Bangladeshi operation as well as sharply lower losses in its Sri Lankan operation plus higher profit from its domestic operation led to a turnaround in Axiata's operating results from an operating loss of RM143 million in 4Q2008 to an operating profit of RM493 million in 1Q2009. Axiata's other operating income increased from RM44 million in 4Q2008 to RM172 million in 1Q2009, boosted by a one-off gain of RM103 million arising from the de-recognition of its dark fibre optic line as a results of a finance lease arrangement. Finally, Axiata has also benefited from lower loss contribution from Dialog & jointly controlled entity. All these resulted in Axiata reporting a pre-tax profit of RM191 million as compared to a pre-tax loss of RM668 million previously.


Table 2: Axiata's detailed P&L account for 5 quarters

One of the main problem that I have with Axiata previously was its poor financial position. I have remarked that this will hardly improved even after the RI of 4.692 billion shares at RM1.12 each. However, on closer examination, that may not be the case. I have re-computed the current & gearing ratio (after the RI proceed has been received). Current ratio would improved from 0.70 to 1.21 times, while gearing ratio would drop from 1.67 to 0.95 times. Liquidity position is satisfactory, while solvency may be a bit high but should improve with cash inflow generated.


Table 3: Axiata's Financial Position as at 31/3/2009 (& adjusted for RI)

Technical Outlook

As noted previously, Axiata's technical outlook has turned positive as the stock jas broken above its downtrend line. Also, you can see that its 20-day SMA has crossed above its 50-day & 100-day SMA.


Chart: Axiata's daily chart as at 19/5/2009 (Source: Tradesignum)

Conclusion

Based on the improved financial performance & position as well as bullish technical outlook, Axiata is a good stock for long-term investment.

BHIC- a possible trading BUY

Background

Boustead Heavy Industries Corp Bhd ('BHIC')'s principal activities are shipbuilding, ship-repairing, oil and gas fabrication, hook up and commissioning and fabrication of steel structures. Other activities include providing services in relation to weapons and electronics, arsenal, missiles, telecommunication and navigation systems and defense-related products, supply and service of marine and naval defense-related products.

Formerly known as PSC Industries Berhad, BHIC had completed a restructuring scheme in August 2007. The stock had a sharp run-up from RM1.50 to a high of RM7.75 in December 2007.

Recent Financial Results

BHIC has just announced its results for 1Q2009 ended 31/3/2009 on May 15. When compared to the previous corresponding quarter (1Q2008), its net profit dropped by 51% from RM31.1 million to RM15.3 million despite a 14.6%-increase in turnover from RM101 million to RM116 million. On the other hand, its net profit improved upon the preceding quarter (by a mere 2.4%) due to lower tax provision while pre-tax profit was 15.3% lower on the back of a 31.6%-decline in turnover. The changes in turnover was attributable to changes in progress billing, while 1Q2009 bottom-line was also affected by reduced share of profit from associate (due to lower progress billing on vessel construction).



Valuation

BHIC (closed at RM3.76 at the end of the morning session) is now trading at a trailing PE of 9.4 times (based on the last 4 quarters' EPS of 40 sen). This may appear too optimistic since the last 2 quarters' EPS was about 6 sen each. Assuming that the next 3 quarters' EPS is about 6 sen, then BHIC's 2009 estimated EPS would be about 24 sen- giving it a current PE of 15.7 times. As such, BHIC appears over-valued.

Technical Outlook

BHIC broke above its downtrend line at RM2.50 in March. Thereafter, the share price congested & formed a pattern known as 'bearish wedge'. This wedge is named as such because it has a tendency to break to the downside. However, BHIC did the opposite & broke to the upside today. This breakout is however achieved on fairly thin volume. Can it sustain? We will have to wait & see.


Chart: BHIC's daily chart as at 20/5/2009_12.30noon (Source: Quickcharts)

Conclusion

BHIC could be a trading BUY based on technical consideration. On the fundamental front, the stock appears expensive. It may secure more contracts in the near future which may boost its top-line & bottom-line.

Plantation stocks rally

On Monday, Bursa Malaysia Bhd launched three new FTSE Bursa Malaysia Palm Oil Plantation Index series that allow investors to track the performance of selected major Asian listed plantation companies (go here for more details).
The FTSE Bursa Malaysia Palm Oil Plantation Indices include:
•The ringgit-denominated FTSE Bursa Malaysia Palm Oil Plantation Index based on FTSE Bursa Malaysia Emas,
•The ringgit-based FTSE Bursa Malaysia Asian Palm Oil Plantation Index, and
•The US dollar-based FTSE Bursa Malaysia Asian Palm Oil Plantation Index.
All three indices have gone up significantly since the launch. See Chart 1-3 below.


Chart 1: FBMPALMOIL's 15-min chart as at 20/5/2009_12.30 noon (Source: Quickcharts)


Chart 2: FBMAPMYR's 15-min chart as at 20/5/2009_12.30 noon (Source: Quickcharts)


Chart 3: FBMAPUSD's 15-min chart as at 20/5/2009_12.30 noon (Source: Quickcharts)

While these new indices may continue to rise due to demand by some fund managers-- allocating their moneys into agri-food sector-- I believe that this new dynamic is likely to be short-lived. The supply & demand of commodities & commodity-related equities as an investment asset-- which was a mania one or two years ago-- may not make a return so soon. While, this kind of investment approach may fit nicely into the inflation-hedge theme, I do not see the smart money or the deep pocket jumping onto this bandwagon again so quickly after their recent spectacular bust.

With the above in mind, I believe that the strong run-up in plantation stocks today may present a good opportunity to sell into strength. From the Plantation index's weekly chart, we can see that the immediate resistance posed by the medium-term downtrend line is at 6000, while horizontal line resistance can be seen at 5500 & 6400.


Chart 4: Plantation's weekly chart as at 19/5/2009 (Source: Quickcharts)

We must not forget the CPO price index. This index looks rather topppish after a sharp run-up from a low of RM2000 in end-March to a recent high of RM2870 on May 13. At the end of this morning session, CPO prices for June delivery closed at RM2735. If this price can hold above RM2600, the CPO price's uptrend is still be intact. A break below that could signal a correction in CPO. This could then lead to a correction in plantation stocks. As noted before, the output of CPO increased by about 20% in the second half of the calendar year & this additional supply would put pressure on the prices of CPO.


Chart 5: CPO's daily chart as at May 19, 2009 (source: ifs.marketcenter.com)