This share swap is generally viewed as positive for MAS (as it would receive some business flow from Airasia) and negative for Airasia (as its operation could be constrained). As at 11.00am, Airasia dropped 42 sen to RM3.53. If you look at Chart 1 (plotted on linear scale), Airasia is very near the intermediate uptrend line support of RM3.50. The MACD indicator is also testing its uptrend line but the RSI broke its uptrend line. If Airasia break this uptrend line, it would drop to the long-term uptrend line at RM3.00.
Chart 1: Airasia's daily chart as at August 10, 2011_11.00am (Source: Quickcharts)
The next chart is also a daily chart but plotted on log scale. The long-term uptrend line support is at RM3.50. If this uptrend line is violated, Airasia would enter into a sideway movement or even a downtrend. However, it is too early to presume that Airasia would be going into a bear market.
The share swap comes at a time of poor market sentiment and generally poorer results for airlines industry. The sharp drop in Airasia must also be viewed within the context of a stock that was suspended from trading for the past two days and the drop could also include a lot of catching-up action rather than purely an assessment of the share swap deal.
Chart 2: Airasia's daily chart as at August 9, 2011_plotted on log scale (Source: Tradesignum)
7 comments:
alex,
Do you think MRCB is a good pick under the climate?
research from UOB:
The key rebound plays are BToto, Gamuda, MRCB and UEM Land as
these stocks will have visible event catalysts in 2H11. Notable smaller
cap stocks include M&A beneficiary CI Holdings, which has fallen 15%
from its recent peak to trade 30% below the net cash it would receive
after it completes the sale of local Pepsico bottler Permanis to Japan’s
Asahi. Another interesting M&A candidate worth highlighting is ECM Libra,
which trades well below its book value of RM1.25/share.
What I afraid is MAS poor management will get involve in AIRASIA. AIRASIA should have benefits in long term if terms in the agreement are materialized.
Hi Alex
Can you comment on Huayang share performance. Huayang share have adjusted more than 20% since the correction. Is it overdone?
Huayang earning visibility is bright for at least another 2 year judging from its locked in sales of 350m, which in turn ensure its EPS to be sustain and PE remain at <6x.
Short term catalyst is Huayang is expect to declare dividend of 7.5sen by next wk after AGM approval, which give rise to yield of 5.4%, this is follow by 1 for 3 bonus issue, expect to be announce by early Sept.
Hi Alex
What is your view on Armada share?
Thank you
Hi Ivan
It is hard to gauge Armada's technical outlook as the stock was only listed for 17 days. However, the aggressive buying in the first 2 days of trading could have pushed the stock into the over-valued territory. As such, I would wait for the price to retrace or for the financial results to justify this price.
Hi hng
I like Huayang enough to post on it. It is fundamentally a good company, with a sizable low cost land bank. Its property development will still sell well even in an economically challenging period ahead as it caters for medium-income segment of the market where the demand is still strong.
The stock should have good support at the horizontal support of RM1.28-1.30, which coincides with the 200-day SMA line at RM1.30.
Hi Florence
MRCB violated its 200-day SMA line last Tuesday but recover above that line at the end of the day. Chartwise, the stock is in an uptrend line with support at RM2.00-2.05.
MRCB has a lot of positive news flow regarding more projects to come. If only, the financial performance is more uplifting.
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