Masterskill Education Group Bhd ('MEGB') has been sliding since early August after making a high of RM4.30 on July 27. Yesterday, it broke below the horizontal support of RM3.60. Today, it broke below its recent low of RM3.54 recorded on May 25. In technical analysis, a stock that has made a new low is one that must be treated with caution & to be avoided.
Chart 1: MEGB's daily chart as at Sept 20, 2010 (Source: Quickcharts)
A quick check at MEGB's latest financial statement for QE30/6/2010 shows decent results & fairly healthy financial position. Its current ratio was at 4.8 times while gearing ratio at only 0.05 time. It has cash balance of RM221 million, which is earmarked for the construction of a campus for Masterskill University College of Health Sciences in Kajang on a piece of land measuring about 20 hectares. The campus to be built will consist of an academic block of 700,000 square feet & hostel facilities measuring 1 million square feet, which can house up to 20,000 students.
Valuation
MEGB is now trading at current PE of about 15 times. MEGB is trading at the same multiple as SEG while another educational group, HELP is trading at PE of 23 times. SEG had completed a corporate exercise consisting of a 1-for-2 share split; a 2-for-5 bonus issue & a 1-for-2 warrant issue. Due to the 'generous' corporate exercise, investors piled into SEG & pushed the share price to a high of RM2.90 in mid-August. Now, it's HELP's turn to run the gauntlet as investors again chase the stock to get the bonus share as HELP will carry out a 3-for-5 bonus issue (with entitlement date: October 1). MEGB has not proposed any corporate exercise & will not take part in this madness.
Table: MEGB, HELP & SEG's last 2 quarters' financial results & valuation
Chart 2: SEG's daily chart as at Sept 20, 2010 (Source: Quickcharts)
Chart 3: HELP's daily chart as at Sept 20, 2010 (Source: Quickcharts)
Comment
Based on the decline in the share price of SEG & MEGB, it seems that the education sector theme play is beginning to lose steam. HELP's current rally will be a true test of the staying power of this theme play. We can see an interesting performance in these three stocks, with one a leader, another a follower and lastly a spoiler.
Conclusion
Based on high valuation, I believe we should avoid all three stocks, especially HELP. They could be considered for long-term investment if their valuation improved to 10 times or lower (when their share price dropped further).
Hi Alex,
ReplyDeleteNeed to seek your advise.
KFC WA has been shooting up since it first listed. However, the mother share (KFC) is droping. Is KFC a good buy now?
Technically, is the KFC share fall under the overbought level?
Hi Alex,
ReplyDeleteGenM has jumped up all in a sudden from 3pm, and has now +RM0.45..any news coming in for this?
thanks in advance
Hi Eric,
ReplyDeleteKFC-wa has one good thing in its favor- the number issued. Only 31.7 million units.
Its exercise price is at RM3.00. With a price of RM1.69 now & share price at RM3.21, KFC-wa has a premium of 46%. At that premium, KFC-wa is ridiculously overpriced.
It's best to take profit on this warrant.
Hi Kelvinkcm
ReplyDeleteI did not hear anything regarding GenM. However, it's interesting to note that GenM has finally started to buy back its own shares. It bought 1 million at RM3.235 yesterday.
Hi Alex
ReplyDeleteAs mention before, i've bought many PJD on hope on its warrant on basis 3 for 8 as well as its upcoming dividend of 5sen (6.6% yield). PJD have slowly show some movement from 71sen to 76sen now, but its PJD-wb move much more from 4.5sen to current 7sen, a gain of >50%!?
As these PJD-wb also entitle 3 for 8 warrant, its implies market price upcoming warrant at least 20sen (7sen x 8 unit) + (2sen x 3 unit) divided by 3 unit.
What is your opinion on both PJD and PJD-WB, should i exchange in order to gain more exposure?
This comment has been removed by the author.
ReplyDeleteHi Alex,
ReplyDeleteGovernment had announced ETP which include MRT. Is Gamuda still worth to buy as it is potential contractor?
Thanks
hi alex,
ReplyDeletewith reference to your article on TAGB-PA, i checked the star and it showed that the ex-price is 0.50. assuming TAGB-PA is trading at 0.34 and then adding 0.50 to it for conversion, wouldn't that be more expensive that its mother share which is only trading at 0.40. pls advise.
thanks
maxwealth88
Hi Alex,
ReplyDeleteAdvise whether is good time to enter Tomypak with saying that 2nd half of the year economic result may not be exiciting as 1st part.
Hi Alex,
ReplyDeleteCan you please share your inputs on DXN?. TQ. :-)
Hi Alex,
ReplyDeleteSincerely to get your advise.
After ETP announced, any good news direct to Gamuda ?
Izit uptrending same as GENM?
Still worth follow to buy in for Gamuda ?
Thanks for helping.
Dear Alex,
ReplyDeleteSome correction to your article. The bonus for HELP is 3 for 5 and NOT 2 for 5 as mentioned. Anyway good job. Have been following you for the past few years
Dear Alex,
ReplyDeleteRubber glove shares went down a lot recently. What's the best time/price to go in for Latexx?
Good morning,Alex.
ReplyDeleteCould you please give your valued opinion on PLENITU?Have been tracking this stock since it announced it's proposed bonus issue.Waited for it to trend down but it never did.Is it still viable to buy,tecnically and fundamentally?Seems it has a net cash of 2.40 per share and NTA of 5.37 and EPS of 62 sen.Thanks for spending your time on this an for your valuable comments.
Hi hng
ReplyDeleteYour question:
"What is your opinion on both PJD and PJD-WB, should i exchange in order to gain more exposure?"
Ans:
PJDev recorded an earning of 11.58 sen for FYJun2010. At RM0.76 overnight, PJDev is trading at a PE of 6.6 times, which is reasonable & undemanding. Based on this, I think PJDev could be a stock that you can hold long-term.
If you choose to buy PJDev-wb & proceed to replace it with the new warrant (PJDev-wc), the coat of 3000 units of this PJDev-wc is about 20.7 sen each. Assuming that PJDev-wc trades at cost price & the share price remains at RM0.76, its premium of PJDev-wc would be 59% (exercise price of new warrant is RM1.00). At such high premium, PJDev-wc should slide below the cost price. You would incur a loss. The better approach to get PJDev-wc is go buy the share & subscribe for the entitlement.
Finally, you would be better off being a shareholder (and, not a warrant holder) because you would be entitled to the upcoming dividend of 5 sen & you may even be entitled to subscribe for the share of OCC CABLES BERHAD, a subsidiary which is in the process of being listed on Bursa.
Hi MaxWealth88
ReplyDeleteThe conversion of TAGB-PA to TAGB is 1-to-1. The exercise price of RM0.50 is satisfied by proffering RM0.50 of TAGB-PA.
Hi cheer
ReplyDeleteTomypak is in an uptrend line, with support at RM1.20-1.22. This could be a good entry level to this stock.
However, Tomypak's net profit has declined sequentially in the past 3 quarters, probably due to the appreciation of the Ringgit. Based on the results for 1H2010, its annualized earning is respectable at 15.9 sen. At RM1.34 overnight, it's trading at a PE of 8.4 times, which is reasonable.
Hi Charlie
ReplyDeleteThanks for pointing out the error.
Hi newbie said...
ReplyDeleteAll the points mentioned by you regarding Plenitud, such as net cash of 2.40 per share; NTA of 5.37 and EPS of 62 sen, do make a strong case for the stock. However, this information is public knowledge for quite a while. The proposed bonus issue is the catalyst for the current rally.
Looking at the long-term chart, it seems that the stock is moving upward within a channel. The upside of this channel may cap this rally at RM5.30-5.50.
However, the stock has risen quite substantially and as such, you should view this as a high risk & high reward play.
Good luck.
Hi Lim
ReplyDeleteI still watching Rubber glove shares from the sideline. While the stocks in this sector have declined quite significantly, this bear market has just started & it may run for another 12 months.
Hi xinghuei08
ReplyDeleteI think Gamuda is a trading BUY, but a tricky one at that. Those in the know has gotten in early & if you charged in now, you may get caught by profit-taking. If you still like to get in, you should wait for some pullback, say to RM3.80-85. The MRT project is a huge undertaking that would take a while to bear fruit.
Hi Stephanie
ReplyDeleteDXN is a very profitable MLM company. Its earning is about 18 sen. Based on current price of RM1.07, it's trading at a PE of 5.9 times, which is very reasonable.
Chartwise, DXN would be testing its all-time high & strong horizontal resistance at RM1.10 soon. Can it pass through that? If it can do so, the stock would have more upside.
Thanks Alex for your kind advise on PJD. For your information, PJD already decided not to proceed listing its OCC CABLES BERHAD, presumably due to market condition not favor penny IPO stock.
ReplyDeleteFrom its balance sheet PJD should no have problem financially even without listing its cable division, as it still hold about RM 105m cash and its investment property division already make turnaround, record remarkable earning mainly from full occupancy of its newly Menara PJD, contributing about 18% Q4 earning
Hi keane hong
ReplyDeleteGENM has a volatility breakout at RM3.00 on September 9. Prior to that, the stock was trading within a trading band of RM2.60 & RM3.00 over a prolonged period (almost 15 months). Once a stock has a volatility breakout, it could zoom up (or down). It's like an inflated balloon which would fly off when you release the muzzle (or the nose). Another stock with a similar set-up & breakout is MMC.
As I've said earlier in another comment, I think Gamuda is a trading BUY, but a tricky one at that. Those in the know has gotten in early & if you charged in now, you may get caught by profit-taking. If you still like to get in, you should wait for some pullback, say to RM3.80-85. The MRT project is a huge undertaking that would take a while to bear fruit.
Hi Alex,
ReplyDeleteThanks for pointing out the technicals for PLENITU.
HI Alex, been a follower of your blog for sometimes. Would like your advise on CSCSTEL. This stock has been idling at range of RM1.60-RM1.80 for a long time. Is is a good stock to hold for long term in view of its stability and constant dividend yield? Thank you.
ReplyDeleteHi Alex,
ReplyDeleteJust notice Goldman Sach has chosen MYEG. What is your advice on this stock in term of Financial Analysis and entry price?
Hi Alex,
ReplyDeleteCan you please share your inputs on SP Setia?
Thank you
what's going on with property counters ? seems like next play will be on property??!! Alex, how does UEMland look on you?thanks in advance
ReplyDeleteHi Alex again,
ReplyDeletehttp://biz.thestar.com.my/news/story.asp?file=/2010/9/22/business/7079354&sec=business is news talk about main the O&G. What do you think stocks like perisai and dialog ?