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Thursday, September 30, 2010

UEMLand- a rough diamond?

In June 2009, I posted about the potential of UEMLand (here). To wit:
A few weeks back, a friend asked me what I thought the upper limit of the rally in UEMLand would be. I told her that UEMLand might follow the footsteps of its predecessor, UEMWorld which in turn followed the footsteps of its predecessor, Renong. What I've meant was that UEMLand would slowly rise to the RM4.00 level over a period of a few years... The timeline will vary according to corporate development & economic conditions.
I appended below the chart of UEMWorld (no longer listed) & the current chart of UEMLand. The current rally in UEMLand is similar to the rally in UEMWorld From January to May 2007 where the share price rose from below RM2.00 to RM4.50 (denoted as 'C').

The catalyst for a re-rating of UEMLand could be the improved relationship between Malaysia & Singapore, which would facilitate more investment in Johor in general & the Iskandar Malaysia development area in particular. The latter is owned by UEMLand. The better relationship between Malaysia & Singapore was sealed when the long-running problem of KTM land in Singapore was finally resolved recently (here).


Chart: The combined daily chart of UEMWorld (up to its delisting on May 25, 2007) & UEMLand as at 29/9/2010 (Source: Tradesignum)

A cheaper alternative to ride on this play is to get into the CWs or the CBLC. The preferred instrument is UEMLand-CD for long tenor, lower premium & higher gearing. The latter is a double-edged sword! See the table below.


Table: UEMLand's CWs & CBLC- Valuation & Main Terms

Note: CBLCs are like CWs, except they come with a Call Price which necessitates the issuer to "acquire" the instrument when the underlying share price drops below the Call Price. This feature is like an insurance policy but since the share price is so much higher than the Call Price, it is unlikely to be triggered. For all intend & purposes, you may treat UEMLand-JA as a CW.

Haio- Where's the soft landing when you need one?

Results Update

Haio announced its results for QE31/7/2010 yesterday. Its net profit dropped 45% q-o-q or 58% y-o-y to RM7.8 million while its turnover also declined by 45% q-o-q or 63% y-o-y to RM55 million. The decline in both turnover & net profit was attributable to lower revenue from the MLM division which was attributable to more stringent rules on new member's recruitment and enhancement of stockists' management & professionalism since the last financial year. To be frank, I really do not know what's the real issue affecting Haio. Needless to say that any company that has seen its top-line plummeted like what was experienced by Haio over the past few quarters is facing serious problem. See the table & Chart 1 below.


Table: Haio's 8 quarterly results



Chart 1: Haio's 22 quarterly results

Financial Position

Despite the poor financial performance, Haio's financial position is deemed satisfactory. As at 31/7/2010, its current ratio stood at 4.3 time while borrowings to shareholders' funds stood at 0.1 time.

Valuation

Haio (at RM2.96 as at 12.00 noon) is now trading at a trailing PE of 10 times (based on the last 4 quarters' EPS of 30.16 sen). While this may not look bad, this number is not a good guide as to Haio's future performance. The question on everyone's mind is whether the sharp plunge in Haio's top-line & bottom-line can be arrested. If so, when?

Technical Outlook

From the daily chart (Chart 2), Haio is still in a medium-term downtrend. The downtrend line resistance is at RM3.50 while the support from the parallel line is at RM2.90-2.95.


Chart 2: Haio's daily chart as at Sept 29, 2010_plotted on linear scale (Source: Quickcharts)

Despite the above, we can see that Haio is still in a long-term uptrend (plotted on log of scale) that start in late 2005 (see the weekly chart, Chart 3). The support from that uptrend line is at RM2.50.


Chart 3: Haio's weekly chart as at Sept 29, 2010_plotted on log scale (Source: Tradesignum)

Conclusion

Based on the above, it is prudent to avoid Haio until we can see signs of stability returning to the Haio's financial performance. For those who still wish to buy this stock, you should do so at a very slow pace if the share price can rebound off the long-term uptrend line at RM2.50.

Tuesday, September 28, 2010

HKEX-CD, a 'cheaper' alternative to play HKEX's bullish breakout

HKEX has broken above its downtrend line (SS) at HKD130 last week. Yesterday, it broke above the strong horizontal resistance at HKD150 yesterday. Today, HKEX is experiencing some correction. At the time of writing this post, it is trading at HKD149.80-149.90. If it can recover above the HKD150 today or tomorrow, HKEX could go higher.



Chart: HKEX's weekly chart from July 2007 to Sept 27, 2010 (Source: Yahoo Finance)

You may gain entry into HKEX indirectly by buying the 2 CWs listed in our exchange- HKEX-CC or HKEX-CD. The valuation & terms are tabulated below.


Table: HKEX-CC or HKEX-CD- Valuation & Main Terms

HKEX-CD could be a good trading BUY as its premium (at about 4%) is considered undemanding.

Adventa's profit rebounded!

Results Update

Adventa has just announced its results for QE31/7/2010. Its net profit increased by 27% q-o-q or 79% y-o-y to RM8.2 million while turnover increased by 8% q-o-q or 20% y-o-y to RM87.4 million. Adventa attributed its better performance to high production utilization rate; improvement in the distribution business; and continuous increased production capacity.


Table: Adventa's last 8 quarterly results

What's significant about this quarterly results is that the company did not suffer another quarter of decline in profitability. If that had happened, one cannot avoid drawing the conclusion that the company's profit growth has stopped & the performance of the rubber glove sector has peaked & would continue to see lower profit going forward. On the other hand, it is also too early to conclude that the worst is over for Adventa & this rubber glove sector. What we have is a stalemate and we would have to see further results to get a clearer picture.


Chart 1: Adventa's last 22 quarterly results



Chart 2: Adventa's profit margin over the last 22 quarterly results

Valuation

Adventa (closed at RM2.39 yesterday) is trading at a PE of 12 times (based on last 4 quarters' EPS of 20 sen). At this multiple & the uncertainty in this sector, Adventa is deemed fully valued.

Technical Outlook

Adventa has dropped since making an all-time high of RM4.30 in January this year. However, the stock has good horizontal support at RM2.20 and RM2.00. Its uptrend line support is at RM2.15-2.20.


Chart 3: Adventa's weekly chart as at Sept 27, 2010_log scale (Source:Tradesignum)

Conclusion

Based on the improved financial performance & good technical outlook, I would rate Adventa a hold. To get into this stock at RM2.00-2.20 may not be a bad idea, though it's a bit early. I would prefer to see another quarter of increased profit before calling a BUY on this stock but then again the price could have moved higher from here.

Monday, September 27, 2010

YTLCMT- may have a bullish breakout

Background

YTL Cement Bhd ('YTLCMT') has recently announced that it proposed to acquire a further 35.16% stake in Perak Hanjoong Simen Sdn Bhd ('Perak-Hanjoong') for RM200,000,000 in cash. Presently, YTLCMT together with its wholly-owned subsidiary holds a 64.84% equity interest in Perak-Hanjoong. For more, go here.

Perak-Hanjoong is the second largest integrated cement producer in the country. Operating two plants located in Padang Rengas, Perak, Perak-Hanjoong has a plant capacity of 3.0 million metric tonnes (“MT”) per annum for clinker and 3.4 million MT per annum for cement, both of which are manufactured for local and export markets. Perak-Hanjoong also has a cement depot and packing plant near Batu Caves in Selangor, with an annual capacity of 600,000 MT

Financial Performance & Position

For FYJun2010, YTLCMT recorded a net profit of RM267 million on a turnover of RM1.842 billion. Its financial position as at 30/6/2010 is deemed satisfactory with current ratio at 1.99 times & gearing ratio at 0.35 times.

Based on EPS for FY2010 of 37.8 sen & the current share price of RM4.24, the stock is trading at a PE of 11.2 times. At this multiple, the stock is reasonably valued. However, the acquisition of additional stake in Perak-Hanjoong is expected to be earning accretive, which means that it could lead to a lowering of the PE multiple as computed earlier. How much of an impact, I do not know.

Technical Outlook

Based on the chart below, YTLCMT may have broken above the downtrend line at RM4.16-17. The immediate horizontal resistance is at RM4.30, while immediate horizontal support is at RM4.00. The bullish breakout is not accompanied by big volume, which raised doubt as to the sustainability of any subsequent rally.


Chart: YTLCMT's weekly chart as at Sept 27, 2010_2.40pm (Source: Quickcharts)

Conclusion

Based on technical breakout, YTLCMT could be a good trading BUY.

Sunday, September 26, 2010

Kbunai & PtgTin- riding on a dream

There is a story in Malaysian Insiders that Karambunai Corp Bhd ('Kbunai') may be involved in the development of a 500-acre “eco-nature” resort in Sabah which has the option to build a casino alongside a mangrove centre, water theme park and waterfront properties. For more, go here.

That report generated great excitement for Kbunai & Petaling Tin Bhd [PtgTin] (both controlled by Dr Chen Lip Keong). Both Kbunai & PtgTin own big tracts of land in Menggatal, Kota Kinabalu where the 6-star Nexus Karambunai Resorts is located.


I has serious doubt about the chances of the proposed casino taking off in view of the following:


1) The political situation in Sabah may not be conducive to a project that might anger the general population, whether Muslims or Christians. Two years ago, Sabah's Chief Minister Datuk Seri Musa Aman stopped the construction of a giant statute of Kuan Yin in the state because it might anger the Muslims within the vicinity. This caused a bitter spate with the then Deputy Chief Minister Tan Sri Chong Kah Kiat, the leader of another component parties of Barisan Nasional who later resigned from the state government (
here). Can the same Chief Minister allow a casino to be built in the State? Some may recall that a few months ago, a few state assemblymen actually proposed the construction of a casino in the Sabah but the idea was shot down by the State Tourism, Culture and Environment Minister Datuk Masidi Manjun (here).

2) A casino is now
a dime a dozen. Unlike 20 years ago, you can find casinos all over the region. While many investors are enamored about the spectacular performance of Genting Singapore, they forget that there are many casinos that are struggling to stay afloat. To succeed, the casino must have sufficient local population with wealth. If not, you would be relying on overseas gamblers. In such a situation, the chance of the casino making money is not good. Sabah does not have a large population with wealth to sustain a casino.

Based on the above, I would rate the chance of Kbunai's developing a casino as unlikely.


Technical View


Looking at the monthly chart of Kbunai (plotted on log scale), we
see that the stock has broken above the accelerated downtrend line at RM0.12 & tested the strong horizontal resistance at RM0.20. If the stock can break above the RM0.20 horizontal resistance, it may test the long-term downtrend line at RM0.30. However, if profit-taking were to set in over the next few days, the stock may drop back to the horizontal support at RM0.10-12, which is the breakout level of the accelerated downtrend line.


Chart 1: Kbunai's monthly chart as at Sept 1, 2010_plotted on log scale (Source: Tradesignum)

From the monthly chart of PtgTin (plotted on log scale), we can see the long-term downtrend line is at RM0.20. The stock broke above that downtrend line on Friday but dropped back towards the breakout level at the close. Can it hold onto this breakout level over the next few days & weather the profit-taking activities?


Chart 2: PtgTin's monthly chart as at Sept 1, 2010_plotted on log scale (Source: Tradesignum)

Comment/Conclusion

In view of the political & economic factors, I believe that the casino proposal is unlikely to take off. Based on this, I think that one should be very careful trading in these two stocks. If you choose to rely on technical analysis for your trade, be sure to stick to the technical rules. Set protective stops & stick to them.

Friday, September 24, 2010

Sunrise may have a bullish breakout

One of my favorite property, Sunrise is again making another attempt to break above its downtrend line. This time, the breakout is accompanied by big volume. The increased volume means that it will have better chance of launching into an uptrend. Its immediate resistance is at the horizontal line of RM2.30 & then at RM2.60.


Chart 1: Sunrise's weekly chart as at Sept 23, 2010_arithmetic scale (Source: Quickcharts)

An alternative view of the Sunrise's price movement is given below by the weekly chart plotted on logarithmic scale. We can see that the stock has yet to break above its downtrend line yesterday. With the gain of 10 sen (price was at RM2.31 as at 4.38pm), Sunrise has successfully broken above the downtrend line, based on this log scale chart.


Chart 2: Sunrise's weekly chart as at Sept 23, 2010_log scale (Source:Tradesignum)

Based on the bullish breakout, Sunrise could be a good trading BUY.

For a recent write-up on this stock, check out this article in the Edge Financial Daily dated September 15, 2010.

Thursday, September 23, 2010

Market Outlook as at September 23, 2010

FBM-KLCI failed to surpass the 1479-1480 level three times over the past few days. The current market correction set in after the index broke its short-term uptrend line support at 1365-1367 today. This correction could send the index to the horizontal support of 1445-1450. If this support failed, it may even test the immediate uptrend line support at 1390-1400.


Chart 1: FBM-KLCI's daily chart as at Sept 23, 2010_4.20pm (Source: Quickcharts)

Looking at the weekly chart below, we can see that the index's uptrend can be fitted into a 3-fan line pattern. The possible third fan line support is at 1360-1370. If that support were to be violated, the market outlook would turn bearish. We have seen a similar 3-fan lines pattern in 2007/8. In that instance, the market turned bearish when the index broke below the third fan line at 1200 in June 2008.

See how the current rally failed to surpass the second fan line at 1480. In the 2007/8 bull market, the index also failed to surpass the second fan line in May 2008.


Chart 2: FBM-KLCI's daily chart as at Sept 22, 2010 (Source: Quickcharts)

Based on the above, we can expect the market to be weaker over the next few days. Until we have seen a convincing recovery, we must treat this market with caution.

USD-RM cross rate may hold the key to the direction of FBM-KLCI

Like many Asian currencies, our Ringgit has strengthened substantially since March 2009 (see Chart 1 below). This is reflected in the cross rate of USD-RM which dropped from 3.70 to 3.10. A host of Malaysian exporters are suffering the effect of a stronger Ringgit. Their cry for help can be heard in the corridor of power & soon our central bank would have little choice but to step into the forex market to sell Ringgit in order to reverse the trend. The first Asian central bank to act in this fashion is the BOJ & I expect other central banks would not be far behind.


Chart 1: USD-RM exchange rate as at September 22, 2010 (Source: Yahoo Finance)

I have mentioned before that our stock market is correlated to the strength of our Ringgit. To put it differently, our FBM-KLCI is inversely correlated to the USD-RM cross rate. From Chart 2 below, we can see the following:

1) the bullish reversal in the USD-RM in March 2008 coincided with the top of the 2007 bull market for equity; and
2) the bearish reversal in the USD-RM in March 2009 coincided with the bottom of the 2008-9 bear market for equity.

It's interesting to note that the 2007 bull market in Bursa ended with a V-shape reversal. Our stock market has a sharp run-up over the past 2 months. Are we about to see another V-shape reversal? Has the die been cast? Watch the forex market closely!



Chart 2: FBM-KLCI & USD-RM exchange rate for the past 5 years (Source: Tradesignum & Yahoo Finance)

Wednesday, September 22, 2010

GenM & MMC may go higher after the volatility breakout

Yesterday, GenM had a big upside move. This move was a follow-through move since the stock had a volatility breakout on August 17 when GenM broke above the RM3.00 on big volume. Despite a close at RM2.99 on that day, the big upside move coupled with huge volume was a sign of volatility breakout.


Chart 1: GenM's daily chart as at Sept 22, 2010 (Source: Quickcharts)

Another stock which has a more subdue volatility breakout is MMC. On September 2, MMC broke above the RM2.60 level on big volume. The follow-through came today after a short period of consolidation.


Chart 2: MMC's daily chart as at Sept 22, 2010 (Source: Quickcharts)

Volatility breakout happens when a stock which has been consolidating for a long period of more months- even a few years- finally snapped out of the slumber. One may see the consolidation process as a clearing process which culminated in the decisive victory either for the bulls or the bears. Once the bulls or the bears have the upper hand, the rally or the selldown would proceed.

For more on volatility breakout, check out this article by the Trading Edge.

LionDiv- a cheap steel stock

Background

Lion Diversified Holdings Berhad ('LionDiv') is involved in manufacturing and sale of steel products; property development and management; and manufacturing and sale of computer and related products.

Recent Financial Results

LionDiv's performance has improved steadily over the past 3 quarters. While the positive bottom-line in the previous 2 quarters (QE31/3/2010 & QE31/12/2009) have benefited from gains from the disposal of investment of RM51 million & RM31 million, respectively, its latest quarterly results is free from such exceptional item. The company believed that the recovery in steel consumption will continue in line with global recovery & this would contribute sigificantly towards better results for the company as shown in QE30/6/2010. For the segmental results, see Table 2.


Table 1: LionDiv's last 8 quarterly results



Table 2: LionDiv's results for QE30/6/2010 compared to QE30/6/2009 & QE31/3/2010



Chart 1: LionDiv's last 8 quarterly results

Financial Position

LionDiv's financial position is mixed as at 30/6/2010, with poor liquidity but acceptable gearing ratio. This is reflected in its current ratio of 0.9 time & gearing ratio of 0.4 time.

Valuation

LionDiv (closed at RM0.455 yesterday) is now trading at a PE of 1.4 times only (based on annualized EPS of 32 sen) or Price to Book of 0.2 time (based on NTA per share of RM2.09 as at 30/6/2010). Based on this, LionDiv is deemed very cheap.

Technical Outlook

LionDiv appears to have broken above its medium-term downtrend line at RM0.45. Its next resistance is at RM0.52 and then at RM0.54.


Chart 2: LionDiv's daily chart as at Sept 22, 2010 (Source: Quickcharts)

Conclusion

Based on improved financial performance, attractive valuation & positive technical outlook, LionDiv could be a good trading BUY as well as for long-term investment. However, its poor financial position is a matter of concern but since the share price is fairly low, one can take a risk by building up a small position in this stock.

Tuesday, September 21, 2010

MEGB showing the way... downward?

Background

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).

TAGB may be due for a re-rating

TA Global Bhd ('TAGB') is a property arm of the TA Enterprise Bhd ('TA'). It was listed in November 2009 via an Offer for Sale of RM0.50 each & a distribution to TA's shareholders (in the form of a Dividend in Specie). TA's shareholding was reduced from 100% to 58.7% after the exercise. In addition, TA holds 15.5% of TAGB Irredeemable Convertible Preference Shares ('ICPS'). On the exchange, TAGB ICPS is known TAGB-PA.

TAGB-PA has a tenor of 5 year and it's convertible to ordinary share on a 1-for-1 basis starting 2 years after its issuance (October 5, 2011). Since TAGB & TAGB-PA are exchangeable 1-for-1 within 13 months, the price differential should begin to narrow. However, the price movement in TAGB-PA over the past 2 weeks was rather fast. This sharp move could be an early indication of a re-rating of the stock, with investors in the know sweeping up the cheaper instrument (see the charts below). The re-rating coincides with the general re-rating of the property sector as well as possible buzz surrounding TAGB's latest property development, Damansara Avenue.

TAGB's financial position is very strong, with current ratio of 6 times and gearing ratio of 0.13 time as at 30/4/2010. Its financial performance for 1Q2010 (or QE30/4/2010) is unexciting, with net profit of RM18.6 million recorded on the back of a turnover of RM91.5 million. 1Q2010 EPS was only 0.39 sen.


Chart 1: TAGB-PA's daily chart as at Sept 20, 2010 (Source: Quickcharts)



Chart 2: TAGB's daily chart as at Sept 20, 2010 (Source: Quickcharts)

Based on the re-rating of the property sector in general & possibly TAGB in particular, the stock could be a good medium-term investment. For those with longer time horizon, you may consider the cheaper entry via TAGB-PA.

Monday, September 20, 2010

Nexttrade hit by ad server malware



This blog is presently affected with warnings of malware from Google originating from Innity, an online advertising network. According to a report on Google Safe Browsing, Innity hosted malicious software and distributed it to sites that serve the Innity ads.


According to Innity, "We have excluded the affected delivery network from our advertising network until the service provider rectifies the issue from their side. We have also initiated the Google review process, and requested Google to recheck the site and declassify it as malware. The process could take up to 48 hours as the situation is complicated due to the fact that there is no detailed report as to why Google has classified us as a malware distributor".

As a temporary solution, I have removed the Innity tag from the blog. Any inconvenience caused is much regretted.

Friday, September 17, 2010

HSBC may have a bullish breakout

In early August, HSBC Holdings plc ('HSBC') broke above its 3-years old downtrend line at HKD80.00. That breakout did not recruit sufficient support & the stock slid below the said downtrend line & hit a low of HKD75.00. The following 2 weeks, HSBC rallied above the same downtrend line & came close to its recent high of HKD83.00 (recorded in the 1st week of August). Today, it gained 90 cent to close at HKD82.60. A break above HKD83.00 would signal the continuation of the short-term uptrend that began at the end of May as well as the beginning of a new upleg for the stock.


Chart: HSBC's weekly chart from July 2007 to Sept 13, 2010 (Source: Yahoo Finance)

You may gain entry into this stock directly or indirectly by buying the 2 CWs listed in our exchange- HSBC-C6 or HSBC-C7. The valuation & terms are tabulated below.


Table: HSBC-C6 or HSBC-C7- Valuation & Main Terms

Despite the slightly higher premium, I prefer HSBC-C7 to HSBC-C6 for longer duration.

MSC- going for dual listing on SGX

Background

Malaysia Smelting Corp Bhd (‘MSC’) is one of the largest, fully-integrated producers of tin metal in the world. In the last commodity boom in 2007, it ventured into other mining businesses, such as gold, coal and nickel. The collapse of the commodity bubble in 2008 hit the company quite badly & it's now in the process of divesting all these non-tin related ventures in order to pay down its high bank borrowings.

Recent Corporate Development


MSC has just proposed to a secondary listing of its shares on the Singapore stock exchange. The proposed secondary listing is viewed as an avenue to increase the trading activity of MSC shares as well as to provide an alternative market for MSC to raise funds for working capital purposes. MSC is a 73.12%-owned subsidiary of The Straits Trading Company Ltd, a company listed on the Singapore stock exchange. For more, go
here.

Recent Financial Results


In the latest results for QE30/6/2010, MSC reported a net profit of RM8.0 million- an increase of 14% or RM1.0 million over the net profit achieved in QE30/6/2009 as well as a turnaround from a net loss of RM29 million incurred in the immediate preceding quarter (QE31/3/2010).


The improved net profit was mainly due to lower interest expense, satisfactory performance in the Malaysian operations & higher contributions from its investment in the Rapu Rapu polymetallic project in the Philippines.



Table 1: MSC's last 8 quarterly results



Chart 1: MSC's last 18 quarterly results


Valuation


MSC (closed at RM3.80 on September 15, 2010) is now trading at a PE of 9 times (based on annualized EPS of 42.4 sen) or at a Price to Book of 1.1 times (based on NTA per share of RM3.58 as at 30/6/2010). At these multiples, MSC is deemed reasonably priced.


Technical Outlook


MSC is now resting on the horizontal support of RM3.80. The stock has been rising within a bearish (or, rising) wedge, with resistance at RM4.20-4.25. A breakout above that signal the start of MSC's upleg with first strong resistance at the horizontal line at RM5.50.



Chart 2: MSC's weekly chart as at Sept 13, 2010 (Source: Tradesignum)

MSC should rise in tandem with the rise in the price of tin. In first half of 2008, when tin price spiked up to USD25000, we saw a sharp rise in MSC to above RM9.00. Currently, tin price is rising again after it broke above the horizontal resistance at USD21500-22000 last week. Tin closed at USD23500 on LME yesterday. Further rise in tin price is likely & this should be the catalyst for a play in MSC.


Chart 3: MSC & Tin's weekly chart as at Sept 1, 2010 (Source: Tradesignum & LME)


Conclusion

Based on improved financial performance, higher prices for tin & possible excitement from a dual listing of the stock on SGX, MSC could be a good stock for medium-term investment.

Tuesday, September 14, 2010

GenM- catching up with its Genting SP & Genting HK?

Two of the most talked about stocks in the stock market are Genting Singapore ('Genting SP') & Genting Hong Kong ('Genting HK'). These two stocks have nearly doubled since June on reports of good financial performance. See Chart 1 & 2 below.


Chart 1: Genting HK's daily chart as at Sept 13, 2010 (Source: SGX)



Chart 2: Genting SP's daily chart as at Sept 13, 2010 (Source: SGX)

The question that most investors is asking is when would Genting Malaysia ('GenM') join in this party. GenM's financial performance is also quite commendable. I believe that GenM would take part in the rally very soon. As at 10.30 am this morning, GenM has gained 8 sen to trade at RM3.18. This means that the stock has broken above the strong horizontal resistance of RM3.10. Its next resistance is at RM3.50. See Chart 3 below.


Chart 3: GenM's daily chart as at Sept 13, 2010 (Source: Tradesignum)

Based on technical consideration as well as attractive valuation, GenM could be a good trading BUY.

Thursday, September 09, 2010

Rubber glove stocks going lower


Today we witnessed a substantial rise in the share price of some rubber glove stocks. Among them are Kossan (gained 17 sen to close at RM3.34), Supermx (gained 19 sen to close at RM4.83) and Topglov (gained 10 sen to close at RM5.68). Is the worst over? I will let the following 3 charts answer that question. Compare the closing price of these stocks with their 200-day SMA:
  • Kossan (closed at RM3.34 cf 200-day SMA of RM3.50)
  • Supermx (closed at RM4.83 cf 200-day SMA of RM4.95)
  • Topglov (closed at RM5.68 cf 200-day SMA of RM6.02)
Compare the current negative cross-under with those recorded in second half 2007. Also, look at the positive cross-over recorded in early 2009. From these, you should get a good feel where the rubber glove stocks are heading. To me, the sign is very clear. They have just peaked & they are going lower. Avoid these stocks.


Chart 1: Topglov's daily chart as at Sept 8, 2010_log scale (Source: Tradesignum)



Chart 2: Kossan's daily chart as at Sept 8, 2010_log scale (Source: Tradesignum)



Chart 3: Supermx's daily chart as at Sept 8, 2010_log scale (Source: Tradesignum)

PLUS & Litrak- may see new high

Background

In February this year, I posted a piece recommending that we should take profit on PLUS & Litrak (here). That wasn't a good call. It was made in anticipation of higher interest rate regime which didn't quite pan out. While interest rate eas raised twice, the quantum was rather small and in an elevated stock market, investors seek out defensive stocks such as tolled road concession owners. Both stocks have seen better results due to increased traffic & higher toll rate (or compensation lieu of increased toll rate).

Recent Financial Results

From Table 1 below, you can see the q-o-q & y-o-y performance of PLUS & Litrak. Table 2 shows the valuation of these 2 stocks.


Table 1: PLUS & Litrak's last quarter results compared

Valuation

From Table 2 below, you can see that PLUS is trading below the target price of RM4.47 set by Kenanga (based on Discounted Cash Flow ['DCF'] hile Litrak is trading above the target price of RM3.02 set by ECMLibra (again based on DCF valuation method). The dividend yield of PLUS is about 4% while for Litrak is about 5%.


Table 2: PLUS & Litrak's valuation

Technical Outlook

PLUS broke above its 'horizontal' line at RM3.40-3.50 in July & made a high of RM4.24 on September 2. The target price for the current rally can be calculated by assuming that this move is equivalent to 1-time the distance travelled from the early low to the July breakout level. Based on this, the target price is about RM4.50.


Chart 1: PLUS's monthly chart as at Sept 1, 2010_log scale (Source: Tradesignum)

Interestingly, Litrak may have broken above the 'horizontal' line at RM3.20. Again, if we assumed that the current move is equivalent to the distance travelled from the recent low to the breakout point, then the target price is about RM4.90.


Table 2: Litrak's monthly chart as at Sept 1, 2010 (Source: Tradesignum)

Conclusion

Based on the above, PLUS & Litrak could be a trading BUY. My preference is for Litrak as the stock may have just achieved its breakout.