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Monday, November 30, 2009

Maxis- four CWs issued!!!

Today is only the 7th day of the listing of Maxis on our exchange. On the 6th day of the listing of Maxis (last Thursday), we saw the listing of four Maxis CWs issued by OSK & CIMB (two CWs for each issuer). I am surprised by the timing & the speed at which these CWs were issued & the number of different CWs issued by each of the issuer. Suffice to say that both OSK & CIMB are comfortable with the reward-to-risk proposition of these issues. They must have formed an opinion that Maxis will not surprise too much on the upside.

Let's look at the CWs below. Basically, we can divide them into 3 categories:
1) very short-term & expiring in 2nd quarter 2010 (Maxis-CA);
2) medium-term & expiring in 4th quarter 2010 (Maxis-CB & Maxis-CC); and
3) long-term & expiring in 1st quarter 2011 (Maxis-CD).

One can say that Maxis-CB & Maxis-CC are comparable as their expiry dates are fairly close to one another and that Maxis-CC is preferred to Maxis-CB as the latter has a higher premium. Overall, the premium for all four CWs are relatively high, especially for an underlying stock that is currently trading at a high PE of 18 times (based on annualized EPS of 30.4 sen for FY2009).


Table: Maxis-CWs main terms & conditions

Technically speaking, Maxis appears to be in a very short-term "bullish price channel" based on the intra-day chart below. From the price channel, we can see that Maxis will have trend line support at RM5.38 & price channel resistance at RM5.53. As long as this price channel remained intact, Maxis price movement for the short-term is likely to be favorable.


Chart: Maxis' 15-min chart as at Nov 30, 2009_4.20pm (Source: Quickcharts)

Thursday, November 26, 2009

Construction stocks hit by Dubai World's debt standstill call & Vietnam currency devaluation

Two surprising news have hit construction stocks today. They are:
1) Wednesday’s unexpected decision by Dubai World, the Gulf emirate’s largest state-owned conglomerate, to impose a six-month debt standstill has foreign creditors up in arms. Earlier this month, Dubai’s ruler Sheikh Mohammed Bin Rashid Al Maktoum publicly pledged his support for the group and its obligations.

The consequences of the standstill, and possible eventual default, are far-ranging. The repayment of Dubai World’s $4bn Nakheel bond was seen as a litmus test for the emirate’s ability to deal with the $80bn owed by the sovereign and its state-controlled companies. The emirate’s willingness to do this is now in doubt, especially as only an hour earlier it raised $5bn from two state-controlled banks in Abu Dhabi. This was only half what had been expected, but followed $10bn of earlier support from the kingdom’s richer neighbor.

For more, go here.

2) Vietnam announced a 5 percent devaluation of its tightly controlled currency Wednesday, succumbing to pressure for a weaker dong as foreign reserves dwindle.

It was the third devaluation of the dong in less than two years and suggests Vietnam's large trade deficit is making it difficult for officials to keep the currency stable.

For more, go here.

A few Malaysian construction companies have construction projects in Dubai and property development & construction projects in Vietnam. The above development may impact their bottom-line. We have seen some of these stocks being sold off yesterday & today. Gamuda broke below its uptrend line at RM3.00 yesterday (see Chart 1) & IJM broke its uptrend line support at RM4.50 today.


Chart 1: Gamuda's daily chart as at Nov 26, 2009_4.45pm (Source: Quickcharts)


Chart 2: IJM's daily chart as at Nov 25, 2009 (Source: Tradesignum)

GenM- sitting on a pile of cash

Results Update

GenM reported its results for QE30/9/2009, where its net profit increased by 8.8% q-o-q or 5.4% y-o-y to RM359.5 million while turnover increased by 11.1% q-o-q or 9.1% y-o-y to RM1.336 billion.


Table 1: GenM's 8 quarterly results


Chart 1: GenM's 14 quarterly results

Financial Position

GenM is in a very healthy financial position as at 30/9/2009, with current ratio at an excessive 6.0 times and no bank borrowings. It has bank balances of RM3.098 billion, short-term investment of RM2.201 billion and available-for-sale financial assets of RM1.275 billion. If the short-term investment and available-for-sale financial assets can be realized, GenM would be sitting on a cash reserve of RM6.574 billion. This gives each GenM share a cash backing of RM1.11.

Valuation

Based on the annualized last 3 quarters' EPS of 22.5 sen & yesterday closing price of RM2.87, GenM has a PE of about 12.8 times. If the cash backing of RM1.11 per share is deducted from the closing price, then GenM's PE is only 7.8 times. That would make GenM the most attractively-valued large casino in this region.

Technical Outlook

As noted earlier, GenM has broken above its medium-term downtrend line at RM2.85. However, the stock failed to recruit sufficient following to launch into a rally.


Chart 2: GenM's weekly chart as at Nov 26, 2009_9.50am (Source: Quickcharts)

Conclusion

Based on continued good financial performance, attractive valuation and bullish technical breakout, GenM is a good stock for both long-term investment & short-term trading. Despite all the positives, the stock continued to disappoint investors.

Wednesday, November 25, 2009

Latitud's net profit soared

Results Update

Latitud, which is involved in the manufacturing of wooden furniture, has announced its results for 30/9/2009. Its net profit increased by 72.5% q-o-q or 358% y-o-y to RM11.1 million while its turnover increased by 23.8% q-o-q or 14.8% y-o-y to RM127 million. The increased net profit q-o-q was attributable to "the increase in revenue, effective cost-saving measures undertaken by Group coupled with the improve in efficiency and productivity", while for the y-o-y comparison, the improvement was mainly due to "higher revenue, strengthening of USD, decrease in the prices of certain raw materials and profits achieved by its factories in Malaysia and Thailand". These factors had collectively contributed towards Latitud recording an oversize bottom-line for this quarter (see Chart 1 below). Can Latitud repeat this performance again? We will have to wait & see but I have my doubt.


Table: Latitud's 8 quarterly results


Chart 1: Latitud's 17 quarterly results

Valuation

Based on last 4 quarters' EPS of 37 sen & current price of RM1.47 (as at 4.30pm), Latitud has a PE of 4.0 times. At this PE multiple, Latitud is fairly attractive.

Technical Outlook

Latitud appears to be trapped in a bearish "price channel". The channel line would pose resistance to any price rally at RM1.45-50. Earlier this morning, Latitud rallied to a high of RM1.55 before profit-taking set in. As at 4.30pm, it is trading at RM1.47- a gain of 31 sen over yesterday price.


Chart 2: Latitud's daily chart as at Nov 24, 2009(Source: Tradesignum)

Conclusion/Comment


We face a dilemma because we do not know whether the good performance of QE30/9/2009 is a sign of better things to come or an accident? To be sure, we need another quarter of good performance for confirmation. Until then, it is advisable to give due consideration to the chart, whereby a failure to surpass the RM1.45-50 level should lead to quick profit-taking & a sharp pullback for this stock.

Allianz's top-line & bottom-line continued to rise


Results Update


Allianz announced its results for QE30/9/2009. Its net profit increased 51.3% q-o-q to RM23.1 million on the back of a 10.7%-increase in turnover to RM632 million. Compared to the previous corresponding quarter, QE30/9/2008, net profit dropped marginally by 1.1% while turnover was up 23.4%. The lower net profit was due to higher effective tax rate of 35% via-a-vis 28% previously, as some expenses were not tax-deductible while some deferred tax assets were reversed.


Table: Allianz's 8 quarterly results


Chart 1: Allianz's 15 quarterly results

Valuation

Based on last 4 quarters' EPS of 51 sen & closing price of RM4.80 yesterday, Allianz is now trading at a PE of 9.4 times. At this multiple, Allianz is fairly attractive.

Technical Outlook

Allianz is now testing its short-term uptrend line at RM4.70. There is a slightly higher probability that we may see a breakdown of this uptrend line as the indicators (MACD, RSI & DMI) are giving negative signals and the 20-day SMA has just crossed below the 50-day SMA. If the short-term uptrend line is broken, the stock may drop to its horizontal supports at RM4.10 & RM4.30.


Chart 2: Allianz's daily chart as at Nov 24, 2009(Source: Tradesignum)

Conclusion

Based on good financial performance & attractive valuation, Allianz is a good stock for long-term investment. The technical outlook is however a bit cloudy now. If the stock can hold above the short-term uptrend line, the good entry level is about RM4.70-80. If that uptrend line is violated, then one may accumulate slowly at RM4.10-30.

Proton reported improved top-line & bottom-line

Results Update

Proton announced its results for QE30/9/2009 where its net profit increased by 50.4% q-o-q or 87.3% y-o-y to RM82.1 million. Its turnover increased by 13.6% q-o-q or 14.0% y-o-y to RM2.104 billion. The improved performance was due to sales of higher margin products. Sales volume was higher than the immediately preceding quarter, QE30/6/2009 but lower than the previous corresponding quarter, QE30/9/2008.


Table: Proton's 8 quarterly results


Chart 1: Proton's 14 quarterly results

Valuation

If Proton can maintain the performance of 1H2009, its EPS for FY2009 would be about 49.6 sen. Based on this & its closing price yesterday of RM3.71, Proton is now trading at a PE of 7.5 times. This compared quite favorably to Tan Chong's PE of about 10.8 times for FY2009 (based on its closing price of RM2.42 & 9-month EPS of 16.88 sen). However, Tan Chong's share price may have factor in potential income from its development of its Segambut land.

Technical Outlook

Proton may have formed a medium-term uptrend line, with support at RM3.65. A bullish breakout above a short-term downtrend line is noted at RM3.70-72, with slight increased in volume traded.


Chart 2: Proton's weekly chart as at Nov 24, 2009_2.40pm (Source: Quickcharts)

Conclusion


Based on improving financial performance & relatively attractive valuation, Proton could be a good stock for medium-term investment. The technical outlook is positive, with support from the medium-term uptrend line & a possible breakout of its short-term downtrend line.

Monday, November 23, 2009

Market Outlook as at November 23, 2009

Our market could be due for some correction. The weakness in the MACD, RSI & Slow Stochastic indicators could be signaling a pullback in the FBM-KLCI. In particular, we can see that the Slow Stochastic has curved downward and this has, in the past, led to a correction. This correction could send the FBM-KLCI to its 20-day SMA line at 1262. If this support failed, FBM-KLCI may even test the 50-day SMA at 1241. See Chart 1 below.


Chart 1: KLCI's daily chart as at Nov 20, 2009 (Source: Tradesignum)

We have been fortunate that all the corrections in the current rally have been fairly mild. If you look at the monthly chart below, you will see that the absence of sharp correction in the current rally almost mirrored the condition in the super bull run of 1993. This is quite unlike the bull rallies of 1998-99 & 2006-7, where sharp corrections or significant consolidation took place during the rally. The lack of any significant correction or consolidation can lead to complacency in the market. In the US market, analysts are concerned with the low reading in the VIX chart (of about 20-30) which signals the significant complacency in the market. During the Global Financial Crisis of 2008, the VIX chart rose to a high of 80-90 in October-November 2008. Prolonged period of complacency could quickly changed if fresh problems arose. This may lead to sharp sell-off or even a v-shape reversal.


Chart 2: KLCI's monthly chart as at Nov 20, 2009 (Source: Tradesignum)

I believe that our market has reached a level where the risk-to-reward proposition may no longer favor those who take long positions in the market. This conclusion is based on the following:

1) The market is nearing a fairly strong horizontal resistance level of 1280-1300, which happens to be the peak for the market in January 1994 & February 1997 (see Chart 2);

2) FBM-KLCI dropped from a high of about 1520 to a low of about 800- a loss of 720 points- from January to October 2008. Based on last Friday close of 1274, the FBM-KLCI has recovered 65% of the ground ceded in the bear market of 2008. Compared this with the bull market of 1998-99 where the point recovered was 780 points from a low of 260 in September 1998 to the January 2000 high of 1020. This represents a recovery of about 75% of the 1040-point lost in the preceding bear market of 1997-98 (from a 1997 high of 1280 to a low of 260). Would the current recovery match the 1998-99 recovery in term of retracement? If so, we may see a further 10% gain in the FBM-KLCI; and

3) The bull market of 1998-99 lasted about 18 months (from October 1998 to January 2000). This matches the duration of the preceding bear market of 1997-98 which also lasted 18 months (from February 1997 to September 1998). The current bull market started in March 2009 and it's now about 8 months old. The preceding bear market of 2008 started in January 2008 & hit a low in October 2008. If we take the October 2008 low as the end of the bear market of 2008, then the 2008 bear market lasted 10 months. If the duration of the current bull market is similar to the duration of the preceding bear market (like in 1998-99 bull market & the preceding 1997-98 bear market), then the current bull market may still continue for another 2 months.

The above observations may lead the optimists to conclude that the current bull market may still have an upside of 10% & may last another 2 months. That would be a wrong conclusion to draw. We must bear in mind that charting is an art, not a precise science. I would conclude that the market is in a highly elevated position & that correction may be imminent. However, we have yet to see a top or a sell signal. When we have a confirmed sell signal, the prices could be much lower than the current prices. If you share my conclusion, then you should take some precaution to reduce your position in the market.

Friday, November 20, 2009

Scomi- why the sour face?

Background

Scomi Group Bhd ('Scomi') is an investment holding company involved in the provision of services primarily for the oil and gas industry worldwide. The company operates through four segments: Oilfield Services, Energy and Logistics Engineering, Energy Logistics, and Production Enhancement. For the group structure, go here.

Financial Results

Scomi is a fairly profitable company. Its past 4 quarters' pre-tax & net profit declined by 20% & 22% to RM125.6 million & RM90.6 million respectively, when compared to the preceding 4 quarters. This is despite a 7%-increase in turnover from RM2.03 billion to 2.17 billion.


Table: Scomi's 8 quarterly results

Financial Position

As at 30/6/2009, Scomi's financial position is mixed with current ratio at 1.5 times & gearing ratio 1.1 times. The high gearing ratio is a bit of a concern.

Capital-raising exercise

The company is in the process of raising a RM165.5 million Irredeemable Convertible Secured Loans Stocks ('ICSLS') together with up to 219,8 million free detachable warrants (“warrants”) on the basis of fifteen (15) RM0.10 nominal value of ICSLS together with two (2) free warrants for every ten (10) ordinary shares of RM0.10 each in Scomi held.

The ICSLS will have a tenor of 3 years and bear interest at a rate 4% pa. The tenor of the warrant is also 3 years. Conversion for ICSLS: 4000 ICSLS exchangeable to 1000 shares. Conversion for warrant: 1000 warrants plus RM400 exchangeable to 1000 shares.

Arbitrage opportunity

The Rights of the above ICSLS issue, referred to as Scomi-LR, is being traded in the market up to November 23. There is an opportunity for arbitraging: buy 60000 Scomi-LR at RM0.015 each & subscribe at RM0.10 each, you would end up with 60000 ICSLS costing RM6900. Convert the 60000 ICSLS to 15000 Scomi shares, presently trading at RM0.485 each (or valued at RM7275 in total) and you will make a gain of RM375. In addition, you will still be owning 8000 warrants f.o.c.

Valuation

Based on its closing price of RM0.475 yesterday and its EPS of 9 sen for the past 4 quarters, Scomi is trading at an undemanding PE of 5.3 times.

Technical Outlook

Scomi is still in a downtrend. In fact, one can draw a bearish price channel for this stock. The immediate horizontal support is at RM0.44-48 & thereafter RM0.30. Why is Scomi still dropping? I fail to see why it didn't emulate the price performance of Sapcres or Kencana. Could it be due to political factor?


Chart: Scomi's weekly chart as at Nov 19, 2009_12.30noon (Source: Quickcharts)

Conclusion/Comment

Based on the cheap valuation, Scomi could be a good stock for long-term investment. One must bear in mind that this stock's technical outlook is still bearish and would not rally for sometime.

Century- time to take some profit

Results Update

Century has just announced its results for QE30/9/2009. Its net profit increased by 124% q-o-q or 184% y-o-y to RM8.8 million while turnover increased by 43% q-o-q or 53% y-o-y to RM67.3 million.


Table 1: Century's 8 quarterly results

From the chart below, we can see that Century's top-line has surpassed the high of RM46 million recorded in QE31/12/2007. Bottom-line is slightly below the high achieved in QE31/3/2008. Profit margin been eroded due to competitive pressure.


Chart 1: Century's 14 quarterly results

Valuation

Century (closed at RM1.96 yesterday) is now trading at PE of 10.3 times (based on last 4 quarters' EPS of 19 sen). At this multiple, Century is about fairly valued. Compared this to the port operator, NCB which trades at a PE multiple of 10.9 times (based on its closing price of RM3.18 yesterday & EPS of 21.9 sen for 9-month ended 30/9/2009).

Technical Outlook

Century has a strong rally from a low of RM0.68 in March. It has recently surpassed the horizontal resistance of RM1.90 & is now knocking against the psychological RM2.00.


Chart 2: Century's weekly chart as at Nov 19, 2009 (Source: Quickcharts)

Conclusion

After rising nearly 200% over the past 6 months to a price level close to its fair value, Century may be due for some profit-taking. As the technical outlook is still positive, the profit-taking can be carried out slowly.

Thursday, November 19, 2009

Be careful out there

Be very wary in this market. After sitting out of the rally for so long, retailers are getting impatient and are starting to move into the market in a big way. Stocks that appeal to retailers are slowly but surely being coaxed back to life. All kind of inducement are being used to draw in the buyers- tips, research reports, newspaper articles and technical breakouts (for which I'll plead guilty as charged). And, suddenly you will see a heap of activity (read: volume). It is just too enticing. The most difficult thing to resist is temptation!

Look at the 60-minute chart for OSKVI below. A technical breakout at RM0.68 on November 3 (at the close of morning session). A high of RM1.08 in the first hour of November 6 (barely 3 days later). A steady selldown ensued over the next 8 trading days and the share is now back to RM0.65!!!

Wham, bam, thank you mam.


Chart: OSKVI's 60-min chart as at Nov 11, 2009_10.10am (Source: Quickcharts)

Always take precaution by having protective stops!

Salcon poised for a bullish breakout?

Background

Salcon Berhad ('Salcon') is a water infrastructure builder and concessionaire, offering value-added services in the investment, design, construction, commissioning, operation and maintenance of water and waste-water treatment plants.

Salcon’s orderbook as of August 2009 is reported to be about RM1.2 billion and it is currently tendering for more than RM1.5 billion worth of new jobs. For more on Salcon, check out this September article in the Edge as well as this recent post by Malaysian-Finance.

Recent Financial Results

Based on the results for QE30/6/2009, Salcon's net profit increased by 97% q-o-q or 74% y-o-y to RM6.4 million while turnover increased by 40% q-o-q or 80% y-o-y to RM112 million. The better performance was attributable to new construction projects as well as concession income from China. The results for QE30/9/2009 will be announced before the end of the month.


Table 1: Salcon's 8 quarterly results

One of the strong point for Salcon is the steady growth in both its top-line & bottom-line over the past 2 years (see the chart below).


Chart 1: Salcon's 8 quarterly results

Valuation


Salcon (closed at RM0.60 in the morning session) is now trading at a PE of 21 times (based on the last 4 quarters' EPS of 2.8 sen). At this PE multiple, Salcon is fully valued.

Technical Outlook

Notwithstanding the high valuation, Salcon looks appealing from the technical perspective as the share is on the verge of a possible upside breakout of a triangle. The breakout level is at RM0.625.


Chart 2: Salcon's daily chart as at Nov 18, 2009 (Source: Tradesignum)

Conclusion/Comment

Salcon is poised for a possible upside breakout. A catalyst for a bullish rally may come if Salcon announced a good set of results for QE30/9/2009 (expected in the next few days). Watch out for this stock.

Jerneh- another good quarter but...

Results Update

Jerneh's financial performance has recovered in the past two quarters due to writeback of provision for diminution in value of investment and an increase in investment income and lower share of losses from associate companies (such as its JV insurance business in Thailand & the Philippines; its new start-up takaful insurance JV with HSBC; and, its fund management associate, Areca Capital Sdn Bhd).

For QE30/9/2009, Jerneh's net profit increased by 34% q-o-q to RM14.2 million on the back of a 2.6%-increase in turnover to RM68.7 million. Compared to QE30/9/2008, Jerneh has returned to profitability from a small loss of RM0.5 million previously, and an increase in turnover of 19.5%.


Table 1: Jerneh's 8 quarterly results


Chart 1: Jerneh's 11 quarterly results

It will not be easy for Jerneh to maintain the same level of profitability recorded in the past two quarters. Its bottom-line has undoubtedly benefited from the sharp recovery in the stock markets, which may not recur.

Valuation

If we assumed that Jerneh's performance over the past two quarters are "exceptional" i.e. benefiting from write-backs & difficult-to-recur big gains, then the appropriate full-year EPS to use for computing PE multiple is the last 4 quarters' EPS of 8.56 sen. Based on this & Jerneh's closing price of RM1.34 in the morning session, we can compute the PE multiple of 15 times. At this multiple, Jerneh is deemed fairly valued.

Technical Outlook

Jerneh broke above its medium-term downtrend line at RM1.15 in May. It is now in a short-term uptrend line, with support at RM1.30.


Chart 2: Jerneh's weekly chart as at Nov 18, 2009 (Source: Quickcharts)

Conclusion/Comments

While Jerneh may be trading near its fair value, one can still hold onto this stock as it is still in a short-term uptrend. However, we need to track it carefully & act quickly in the event that it breaks below the uptrend line.

Wednesday, November 18, 2009

Alam- an attractive O&G stock

Background

Alam Maritime Resources Bhd ('Alam') is an Oil & Gas services company, involved mainly in the provision of offshore support vessels & underwater services.

Recent Financial results


Alam has just announced its results for 3Q2009 ended 30/9/2009. Its net profit increased marginally q-o-q but by 11% y-o-y to RM25.7 million. Its turnover increased by 28% q-o-q from RM80.7 million to RM103.2 million but declined by 4.2% y-o-y.


Table 1: Alam's 8 quarterly results


Chart 1: Alam's 11 quarterly results

Future Prospect


Alam expects its results to benefit from continued exploration & production programs by oil majors and new vessels being delivered in 2009 & 2010.

Valuation

Alam (closed at RM1.85 at end of the day) has a PE of 9.2 times (based on last 4 quarters' EPS of 20 sen). This compared favorably to Sapcres & Kencana which are both trading at PE of about 18 times. Sapcres (closed at RM2.24 today) reported EPS of 6.2 sen for its 1H2010 ended 31/7/2009 while Kencana (closed at RM2.37 today) recorded EPS of 13.1 sen for its FYE 31/7/2009.

Technical Outlook

Alam has unfortunately broken below its uptrend line at RM1.90-95 in early November. With this breakdown, the share may drift lower & test its horizontal support at RM1.70 & RM1.50.


Chart 2: Alam's weekly chart as at Nov 18, 2009_3.30pm (Source: Quickcharts)

Conclusion

Alam is an attractive O&G counter for long-term investing. Its negative technical outlook could mean that this stock may need to consolidate its recent price gain before starting on its next upleg.

Obama gets his fortune cookie

This is funny but sad, and yet it's true. How has America fallen to such depth?


Via, Big Picture.

Tuesday, November 17, 2009

CPO has broken above its medium-term downtrend line

CPO has broken above its medium-term downtrend line at RM2250 yesterday (see Chart 1 below). I am using this 1-month old weekly chart (up to October 20) because the latest weekly chart appeared in a compressed form with reduced historical data. Sometimes, this format happened to the weekly chart from this website. As at 4.00pm, CPO futures contract for January 2010 is trading at RM2335 (up RM10).


Chart 1: CPO's weekly chart as at Oct 20, 2009 (Source: ifs.marketcenter.com)

I have appended below the daily chart (Chart 2) where you can clearly see that CPO prices have been rising steadily from October 20 until today.


Chart 2: CPO's daily chart as at Nov 16, 2009 (Source: ifs.marketcenter.com)

Based on the bullish breakout, I expect CPO to continue in its present uptrend. This would benefit plantation stocks in general. You may take a look at IJMPLant, which has corrected from its August 8 high of RM3.10 to a recent low of RM2.39. This is partly due to the issuance of warrants which should not lead to such an large adjustment, if at all there is any. So, I think IJMPlant is at an attractive price now (presently, trading at RM2.48).

Errata noted: IJMPlant has a Rights Issue of 160.2 million shares together with 80.1 million warrants on the basis of 2 Rights Shares together with 1 free Warrant for every 8 existing shares held as at 5.00 p.m. on 15 October 2009, at an Issue Price of RM2.10 per Rights Share. Based on this, the adjusted high for IJMPlant is RM2.90 (instead of unadjusted high of RM3.10). As such, the statement that [the sharp drop] "is partly due to the issuance of warrants which should not lead to such an large adjustment, if at all there is any" is incorrect. However, IJMPlant is still my preferred stock for a plantation sector play.

Evergreen's net profit jumped

Results Update

Evergreen just announced its results for 3Q2009 ended 30/9/2009. Its net profit increased by 201% q-o-q or 91% y-o-y to RM31 million while turnover increased by 17% q-o-q or 10% y-o-y to RM212 million. The company explained the improvement:

The increase in the Group’s revenue was largely due to higher sales volume contributed by recently acquired subsidiary, Evergreen Fibreboard (Nilai) Sdn. Bhd. (“EFN”) (previously known as Hume Fibreboard Sdn. Bhd.) and from the new third line in our Thailand operation. The Group’s profit before tax also registered significant improvement as compared with the preceding year corresponding quarter due to the decline in raw material cost, cost cutting measures and improved operational efficiency even though average selling price was lower.



Table 1: Evergreen's 8 quarterly results


Chart 1: Evergreen's 21 quarterly results

Valuation

Evergreen (closed at RM1.50 yesterday) is now trading at a PE of 14 times (based on last 4 quarters' EPS of 10.6 sen). Using the past 4 quarters' EPS may understate Evergreen's earning in the current year. A better estimate may be obtained by annualizing its last quarter's EPS of 6.03 sen: giving a full year EPS of 24 sen. Based on this figure, Evergreen's PE would be 6.2 times. At that multiple, Evergreen is considered fairly attractive.

Technical Outlook

Evergreen has surpassed its medium-term downtrend line at RM1.50 on Nov 9 & 10 (achieving a high of RM1.62). As at 3.45pm, Evergreen is trading at RM1.44- struggling to hold onto the breakout level today. Failure to cross to do could lead to a technical pullback, with support at the horizontal line of RM1.20.


Chart 2: Evergreen's weekly chart as at Nov 17, 2009_12.00noon (Source: Quickcharts)

Conclusion

Based on the improved financial performance & undemanding valuation, Evergreen may be a good stock for long-term investment. From the technical perspective, the stock is at a critical juncture, where continued uptrend is possible if the share price can stay above RM1.50. Failure to do so, could result in consolidation.

SSEC may have broken above its downtrend line

SSEC broke above its downtrend line at 3250 yesterday. With this breakout, SSEC's uptrend will continue. Its next resistance is at 3500, 3800 & 4200-4300.


Chart: SSEC's daily chart as at 16/11/2009 (Source: Stockcharts.com)

The continuation of the rally in the Shanghai market will come as a relief to investors and punters who were worried that the prolonged consolidation could affect sentiment in our market.

GenM may have a bullish breakout

It looks like Genting Malaysia ('GENM') has broken above its medium-term downtrend line at RM2.85-88. Its next resistance is at RM3.00 & RM3.10.


Chart: GenM's weekly chart as at Nov 16, 2009 (Source: Quickcharts)

PJDev may have a bullish breakout

PJDev is involved in property development, construction, manufacturing & hospitality (via Swis-Garden Hotel group). For FYE June 2009, it reported a net profit of RM22.6 million on a turnover of RM629 million.

The stock has broken to the upside of a ascending triangle at RM0.73. Its next resistance is at RM0.88-90. See the daily & weekly charts below.


Chart 1: PJDev's daily chart as at Nov 17, 2009_9.40am (Source: Quickcharts)


Chart 2: PJDev's weekly chart as at Nov 17, 2009_9.40am (Source: Quickcharts)

Monday, November 16, 2009

CSCStel's net profit soared

Background

CSC Steel Holdings Berhad ('CSCStel') is involved in the manufacturing and marketing steel products. Products include hot rolled pickled and coiled steel, cold rolled steel, hot-dipped galvanised steel (GI steel) and pre-painted galvanised steel (PPGI steel or colour coated steel).

CSCStel may benefit from the recent liberalization in the steel sector. This was highlighted earlier by Malaysian-Finance. To wit:
"[CSCStel] also may see a bigger market now because local buyers of secondary flat steel products who had previously enjoyed a 40% duty exemption on their [cold-rolled coils ('CRC')] requirements may now prefer to buy from local producers as imported CRC will be taxed at 25% from Aug 1, ‘09."

Recent Financial results

CSCStel's net profit increased by 312% q-o-q or 42% y-o-y to RM39 million. Turnover was up 62% q-o-q due to higher sales volume but was lower by 33% y-o-y due to lower selling prices. CSCStel's net profit for QE30/9/2009 was higher than QE30/9/2008 due to the absence of the write-down of inventories to net realizable value amounted to RM30 million made in QE30/9/2008.


Table: CSCStel's last 8 quarterly results

Valuation

CSCStel (trading at RM1.38 as at 9.30am this morning) has a PE multiple of 43.1 times (based the last 4 quarters' EPS of 3.2 sen). However, if one were to exclude the impact of the inventory write-down in QE31/12/2008 & factor in the additional demand due to the new duty regime for CRC, then the appropriate EPS to use for calculating the stock's PE is by annualizing the EPS for QE30/9/2009. This will give you an annualized EPS of 41.6 sen. To be on the safe side, let's discount this EPS by 40%- giving us an EPS of 25.0 sen. Based on this EPS, CSCStel's PE multiple is about 5.5 times. At this multiple, CSCStel is deemed attractive.

Technical Outlook

CSCStel in a long-term downtrend which stretches back to early 2005. That downtrend line would cap any rally at RM1.55-58. In addition, an immediate downtrend line that stratches back to mid-2007 can also be drawn. The latter downtrend line would pose some resistance at RM1.42-45.


Chart: CSCStel's daily chart as at Nov 13, 2009 (Source: Tradesignum.com)

Conclusion

Based on the improved financial performance, CSCStel could be a good stock for long-term investment. However, the technical outlook has yet to turn bullish. As such, you can accumulate this stock slowly.

Uchitec may have a bullish breakout

Uchitec broke above its medium-term downtrend line at RM1.25 in April. Since then, the share has been consolidating in an ascending triangle. Earlier this morning, Uchitec broke to the upside of the triangle at RM1.50.


Chart: Uchitec's weekly chart as at Nov 16, 2009_10.00am (Source: Quickcharts)

Based on technical consideration, Uchitec could be a trading BUY.

Friday, November 13, 2009

Yoko- powered up by hefty jump in bottom-line


Background


Tai Kwoong Yokohama (Yoko) is involved in the manufacture & sale of automotive batteries.

Recent Financial Results

Yoko announced its results for 3Q2009 ended 30/9/2009. Its net profit jumped 113% q-o-q to RM6.5 million on the back of a 24%-increase in turnover to RM53 million. Because of the jump in turnover, Yoko recovered from a net loss of RM1.5 million incurred in 3Q2008. The improved performance was due to higher margin, higher sale volume, lower finance cost & lower corporate expenses.


Table 1: Yoko's 8 quarterly results


Chart 1: Yoko's 21 quarterly results

Lead price movement

Lead, the main component in the production of automotive batteries, has been rising since the end of 2008. It bottomed at the 1000-point level, which was a fairly steep drop from its high of 4000-point recorded in October 2007. I believe that Yoko values its inventory on a First-in-First-out (FIFO) method, with a production time lag of about 6-9 months. So, the higher cost of lead in October 2007 impact its bottom-line in QE30/9/2008 & QE31/12/2008. Similarly, the lower cost of lead in November 2008 will boost its bottom-line in QE30/9/2009 & QE31/12/2009.


Chart 2: Lead's weekly chart as at Nov 12, 2009 (Source: London Metal Exchange)

Valuation

Yoko (trading at RM1.20 as at 4.45pm) has a PE multiple of 5.5 times (based on the last 4 quarters' EPS of 22 sen). At this multiple, Yoko is a fairly attractive stock, even though it is a small & illiquid stock and should trade a slight discount.

Technical Outlook

Yoko has broken above its long-term downtrend line at RM0.80-90 in September. It has just surpassed its July 2007 high of RM1.16. The next resistance is at RM1.40 and thereafter RM1.60.


Chart 3: Yoko's monthly chart as at Nov 12, 2009 (Source: Quickcharts)

Conclusion

Based on good financial performance, attractive valuation & bullish technical breakout, Yoko may continue to go up.