KSeng & MTD- a tale of two stocks

KSeng's value to emerge?

In the March 8 issue of the Edge newsletter, there was an article entitled "Time for Keck Seng's value to emerge", where the writer highlighted KSeng's revised NAV per share of RM17.10 provided the company revalued its entire landbank, properties & equity investment. This is not something new as it was picked up before by other writers or reports. For example, the Starbiz in April 2007 made a similar observation:

Based on a conservative estimation arrived at by adding surpluses from the revaluation of Keck Seng's Johor land bank and its equity investments, the company's total NTA could reach as high as RM15 a share compared with RM4.34 currently.

In investment, the re-discovery of a piece of information that had been in the public domain normally would not lead to a strong price movement. So, it was quite a surprise that KSeng put in a sustained strong rally after the Edge article came out, with the share price rallying to a high of about RM5.50-60. Notwithstanding the fine run, I doubt KSeng can go below the RM5.50-60. If the rally were to falter now, KSeng would be putting in a double-top reversal which is similar to another double-top reversal in 1996.


Chart 1: KSeng's monthly chart as at Mar 1, 2010 (Source: Tradesignum)

MTD trading within a multi-year range

This week, the Edge has an article on MTD's venture in the Philippines entitled "MTD stirs on Philippine highway venture". The highway, South Luzon Expressway ('SLE') is expected to contribute an EBIT of RM40 million to MTD's earning in FY2011. SLE is owned by South Luzon Tollway Corp ('SLTC'), which MTD has a 80%-stake. MTD has the first right of refusal to buy the remaining 20% which is currently owned by Phillipine National Construction Corp ('PNCC'). The speculation in the market is that this 20%-stake is up for sale at 4.85 billion Philippines pesos (or, RM352.6 million). As such, MTD's 80%-stake could be valued at RM1.41 billion. This compared favorably to the amount that MTD has spent to rehabilitate the SLE, which was estimated to be about RM870 million. If MTD chose to sell off its stake in SLTC (due to various disputes in the partnership), the exceptional gain could be more than RM500 million.

Strangely, the market did not react to this piece of news. This is because the news has already been circulating in the market for a few weeks which might account for the strong rally in MTD since late February from RM2.90 to about RM3.60-70. One blog which did a nice write-up on MTD was Malaysian Finance (here). From the chart below, we can see that MTD has been trapped within a range between RM1.50 & RM3.50 for the past 10 years. Unless, the deal to sell off its stake in SLTC has been sealed up, I doubt MTD can trade above the RM3.50 resistance.


Chart 2; MTD's monthly chart as at Mar 1, 2010 (Source: Tradesignum)

From the above, we can conclude that investors may jump onto a stock even when the 'news' are old news if the stock hasn't run up yet. Even when that happens, we must also look out for strong resistance level where stale bulls may decide to unload their stocks onto unsuspecting new investors.