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Thursday, March 31, 2011

GenM may have a bullish breakout

I'm posting this next bullish breakout with some hesitation. You guessed it: GenM, the perennial runt in the Genting group, has just broken above the 'horizontal' resistance at RM3.65. The target price for this rally (if it comes true) would be RM4.00-4.10. Dare you buy into this trade?


Chart 1: GenM's daily chart as at Mar 31, 2011_4.30pm (Source: Quickcharts)



Chart 2: GenM's weekly chart as at Mar 31, 2011 (Source: Quickcharts)
[Note: This was added subsequently to show the upcoming horizontal resistance.]

For those who want to punt on this bullish breakout, you may try the CWs (see the table below). All the CWs are fairly priced but my preference is for GenM-JA.


Table: GenM's CWs' terms & valuation

Tomypak may have a bullish breakout

Tomypak has just broken above its downtrend line at RM1.00. Its immediate resistance is the horizontal line at RM1.10 & then at RM1.13-1.15. With this breakout, Tomypak could be a good trading BUY.


Chart: Tomypak's daily chart as at Mar 31, 2011_3.15pm (Source: Quickcharts)

Wednesday, March 30, 2011

Plantation index broke above its downtrend line

CPO has tested the accelerated downtrend line (R1-R1) at RM3350 yesterday. An upside breakout above R1-R1 would precede the test of the 2 months old downtrend line (RR) at RM3500. A break above RM3500 could sign the recovery in CPO prices. The indicators have slowly turned upwards.


Chart 1: CPO's daily chart as at March 30, 2011 (Source: ifs.marketcenter.com)

Plantation index chart is more positive than the CPO chart. It has broken above its accelerated downtrend line (R1-R1) at 7700 on March 18. Today, Plantation index broke above its 2 months old downtrend line (RR) at 7750. It also broke above the horizontal line 7780. With these double breakout, I believe plantation stocks are poised to a strong recovery in the days ahead.


Chart 2: Plantation's daily chart as at March 31, 2011_3.00pm (Source: Quickcharts)

From Chart 3 below, we can see that the Plantation index has recently tested its long term uptrend line at 7450.


Chart 3: Plantation's daily chart (on Log Scale) as at March 31, 2011_3.00pm (Source: Quickcharts)

Based on the bullish breakout if the Plantation index, I believe plantation stocks are good for medium-term trades. This is especailly so if the CPO index can also break above its downtrend line at RM3500.

Sapcres may have a bullish breakout

Sapcres has broken above its medium-term downtrend line at RM3.65-3.70. With this breakout, the stock may continue with its prior uptrend. Its immediate resistance is the March 9 high of RM3.74 & then its January 13 high of RM3.90. Based on this, Sapcres could be a trading BUY.



Chart: Sapcres's daily chart as at Mar 30, 2011_12.30pm (Source: Quickcharts)

For those who want to punt on this bullish breakout, you may try the CWs (see the table below). As you are well be aware, CWs are leverage instruments that will give an outsize return if the trade goes your way. If not, it will give you an outsize loss. Both CWs listed below are quite attractive, with Sapcres-CB trading at a discount while Sapcres-CC is trading at a small premium. The difference in premium or discount could be due to the longer tenor of Sapcres-CC, which may be justifiable. Either one is fine in my book.


Table: Sapcres's CWs' terms & valuation

Yinson- an attractive value stock

Background

Yinson Holdings Bhd ('Yinson') is involved mainly in transportation, shipping, forwarding, and marine transport services.

Recent Financial Results

For QE31/1/2011, Yinson's net profit increased by 169% q-o-q or 90% y-o-y to RM6.8 million while turnover was mixed- increased by 39% y-o-y or dropped 3% q-o-q - to RM152 million. The better bottom-line was attributable to increased gross profit margin for all segments of business.


Table 1: Yinson's last 8 quarterly results



Chart 1: Yinson's last 13 quarterly results

Financial Position


As at 31/1/2011, Yinson's financial position is mixed. Current ratio stood at 1.15 times while debts to equity is high at 1.56 times. The high leverage is due to high short-term borrowings (of RM144 million) to finance its working capital requirement. The bulk of the working capital is tied down in Trade Receivable (of RM236 million). Trade Receivable turnover period is 134 days, which I think is the average credit period in its industry. As such, I consider its financial position to be satisfactory.

Valuation

Yinson (RM1.10 as at 10.30am today) is now trading at a PE of 4.1 times (based on last 4 quarters' EPS of 27 sen). At this multiple, Yinson is deemed fairly attractive.

Technical Outlook

Yinson is in an uptrend, with uptrend line support at RM0.80. Immediate horizontal line support at RM1.00. Its upside could be capped by the line connecting its peaks over the past 2 years. As such, its immediate target could be about RM1.20-1.25.


Chart 2: Yinson's weekly chart as at Mar 29, 2011 (Source: Quickcharts)

Conclusion


Based on good financial performance, attractive valuation & positive technical outlook, Yinson could be a good stock for medium-term investment.

Tuesday, March 29, 2011

Timber stocks- time for some profit-taking

Today, we can see many 2nd & 3rd liners in the timber sector participating in the rally. This means that the retailers are getting into the timber theme play. This is usually a good time to take some profit as retailers are normally late for any party. After them, who else is there to buy & support the rally?


Chart 1: WTK's weekly chart as at March 29, 2011_12.00 noon (Source: Quickcharts)



Chart 2: TaAnn's weekly chart as at March 29, 2011_12.00 noon (Source: Quickcharts)



Chart 3: Lingui's weekly chart as at March 29, 2011_12.00 noon (Source: Quickcharts)



Chart 4: JTiasa's weekly chart as at March 28, 2011 (Source: Quickcharts)

Monday, March 28, 2011

BHIC may have a bullish breakout

BHIC broke above its downtrend line ('RR') at RM4.05 last Friday. It also broke above its horizontal resistance (since turned into a support) at RM4.10. It nearly tested the next horizontal resistance at RM4.30. With the bullish breakout above the downtrend line, BHIC could be a good trading BUY.


Chart: BHIC's daily chart as at Mar 28, 2011_3.45pm (Source: Quickcharts)

Notion & JCY: 2 tech stocks which are staging a comeback

Two tech stocks are showing signs of recovery. They are:

1. Notion


This stock may have broken above its downtrend line ('RR') at RM2.00 last Friday. Notion has been trading within a pennant ('ABCD') at RM2.05 today. Its immediate horizontal resistance is at RM2.10.


Chart 1: Notion's daily chart as at Mar 28, 2011_3.45pm (Source: Quickcharts)

2. JCY

JCY may have broken above its downtrend line ('RR') at RM0.69-0.70 last Friday. It tested its immediate horizontal resistance at RM0.75 in the afternoon without success. However, the heavy trading today is a strong indication that the bullish breakout of the downtrend line last Friday has attracted sufficient buying support.


Chart 2: JCY's daily chart as at Mar 28, 2011_3.15pm (Source: Quickcharts)

Based on the above technical breakout, both Notion & JCY could be good trading BUY.

Thursday, March 24, 2011

Cypark could be a good trading BUY

Cypark is a newly-listed stock that specialized in "the application of environmental science and technology and strategic skills, to provide innovative and practical solutions for a wide variety of environmental problems". Go visit the company's website (here).

It is in talks with the government to close, upgrade and convert 32 non-sanitary landfills into renewable energy (RE) parks, a project that could involve an investment of some RM1 billion. For more, go here.

Today, Cypark has just broken to the upside of its triangle formation at RM2.65. With this bullish breakout, Cypark could potential hit a target of RM3.00-3.20. Based strictly on technical consideration, Cypark could be a good trading BUY.




Chart: Cypark's daily chart as at March 24, 2011_9.30am (Source: Quickcharts)

Haio- better results but more is needed

Results Update

Haio has just announced its results for QE31/1/2011. Its net profit increased by 3.5% q-o-q to RM6.3 million on the back of a 9.5%-increase in turnover to RM57.6 million. Compared to the previous corresponding quarter, its net profit was 65% lower while turnover was 56% lower. The company attributed the improvement to higher sales from the retail division and the recovery of MLM division's sales.


Table: Haio's last 8 quarterly results



Chart 1: Haio's last 24 quarterly results

Financial Position

Despite poorer financial performance for 4 quarters, Haio's financial position is still satisfactory. As at 31/1/2011, its current ratio stood at 3.4 times while debts to equity stood at only 0.1 time.

Valuation

Haio (closed at RM2.27 yesterday) is now trading at a PE of 13 times (based on last 4 quarters' EPS of 17 sen). For a stock that had suffered a collapse in its main business (MLM division), a PE of 13 times is unduly high. Unless a strong recovery happens immediately, I believe the stock could trade at PE of 8 times or lower.

Technical Outlook

Haio is in a downtrend line, with resistance at RM2.50. It also faces immediate resistance from horizontal line at RM2.40 while its immediate support is the horizontal line at RM2.00.


Chart 2: Haio's weekly chart as at March 23, 2011 (Source: Quickcharts)

Conclusion

Despite a better results for the latest quarter, Haio is still rated a SELL based on overvaluation & poor technical outlook.

Wednesday, March 23, 2011

Perisai- a possible trading BUY

Yesterday, I posted that Perisai could be a trading BUY since it has broken above its long-term downtrend line at RM0.68 & the horizontal line at RM0.69. It eventually hit a high of RM0.77 before closing at RM0.74. Reader Ethan questioned whether the earlier attached chart was adjusted for a 5-for-4 Bonus Issue which was completed in May 2009. Unfortunately, Quickcharts did not adjust its data set. Below, I have attached the weekly & monthly charts for Perisai which I have obtained from Tradesignum.

Perisai seems to be rising within an upward channel [ABCD], except a breakdown in September 2008-February 2009 when it revisited the all-time low of RM0.21-0.22. Within the channel, we can see that an intermediate downtrend line (RR) has been capping the rise of the share price for the past 3 years. Perisai broke above that downtrend line yesterday as well as surpassing the last 2 years' high (or horizontal resistance) of RM0.69. With these double breakout, Perisai could be set to test the upper boundary of the upward channel (at D). That could be the target for the present rally, which is roughly about RM0.88-0.90. My earlier recommendation remained but the post is superseded by this post.


Chart 1: Perisai's weekly chart as at March 22, 2011 (Source: Tradesignum)



Chart 2: Perisai's monthly chart as at March 22, 2011 (Source: Tradesignum)

Hat tip to Ethan for pointing out this error.

Tuesday, March 22, 2011

Perisai- a possible trading BUY (SUPERSEDED)

NOTE: THIS POST IS SUPERSEDED BY THE FOLLOWING POST DUE TO ERROR IN THE CHART AND THE ACCOMPANYING COMMENTARY.

Perisai has broken above its long-term downtrend line at RM0.68 today. It has also surpassed its horizontal resistance at RM0.69. Its immediate horizontal resistance at RM0.73 will be next. The indicators are quite positive. This stock could potentially rally to test its horizontal resistance at RM0.80 & RM0.94-0.95.

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


Chart: Perisai's daily chart as at March 22, 2011_11.30am (Source: Quickcharts)

Market Outlook as at March 21, 2011

Our market is set to test its short-term downtrend which started in January. From the two charts below (for FBM-KLCI & FBM-Emas), we can see that an upside move of 1% or more will be sufficient to break above this downtrend line ('RR'). If this were to happen (I think it is a probable scenario), then the current market downtrend would be suspended. The market would either move sideway or stage a recovery rally (which I believe is a more likely scenario). We could then enjoy a decent rally over the next 1-3 weeks where the market would try to recoup half its recent losses. Thus the FBM-KLCI & the FBM-Emas should face resistance at 1525 & 14040 level, respectively. Since both indices have broken below the intermediate uptrend line ('SS') and given the heightened geopolitical risk & challenging economic condition currently, we can expect trading to be volatile. Good luck!


Chart 1: FBM-KLCI's daily chart as at March 21, 2011 (Source: Quickcharts)



Chart 2: FBM-Emas's daily chart as at March 21, 2011 (Source: Quickcharts)

Monday, March 21, 2011

USD index broke its 3-year uptrend line


Last Friday, USD index broke below its 3 years old uptrend line at 76. Unless a quick recovery happened soon, USD index is likely to decline further. The drop in the USD index is somewhat surprising given the heightened geopolitical risks which had normally been favorable to the USD as it's viewed as a safe haven currency. I guess the USD's safe haven status has lost much of its shine since the Fed engaged in easy moneys policy in the past 2 years in its effort to revive the US economy.


Chart 1: USD index's daily chart as at March 18, 2011 (Source: Stockcharts)

We should be tracking the movement of the USD index closely as many stock markets in Asia are inversely correlated to the USD index. A sustained decline in USD index could lead to a recovery in our market. However, not all sectors will benefit from a weaker USD. Exporters in particular will suffer.


Chart 2: AAXJ & USD index's daily chart as at March 18, 2011 (Source: Stockcharts)

Wednesday, March 16, 2011

A Brief Hiatus

I will be on leave for the next two days. I won't be following the markets nor posting anything during this period. It is heartening to see the chaotic situation in Japan has stopped spinning out of control today. We can only hope that we have seen the worst in this disaster, though signs of improvement are few & far in between. Japan's recovery will be a long & arduous journey which will test the resolve of a people well-known for their hard work & discipline.

Topglov announced poor results

Results Update

Topglov has just announced its results for QE28/2/2011. As expected, its net profit dropped by 30% q-o-q or 64% y-o-y to RM25.4 million while its turnover was also lower by 1% q-o-q or 5% y-o-y to RM485 million. The company attributed its poorer performance to higher latex prices & unfavorable forex movement.


Table 1: Topglov's last 8 quarterly results



Chart 1: Topglov's last 19 quarterly results

Prospective Performance

As noted in a recent post, rubber glove producers should enjoy some recovery in the coming months due to possible recovery in USD as well as lower rubber latex prices. See teh chart below.


Chart 2: TOCOM RSS3's price chart as at Mar 1, 2011 (Source: Rubbernet)

Technical Outlook


Topglov has rallied after recovering from a break below its strong horizontal support at RM4.90. It broke above its horizontal resistance at RM5.35 yesterday before profit-taking kicked in earlier today. It may slide back to the psychological RM5.00 level for a short while as the market digests the current poor results. You have to look ahead to a possible improvement which may signal a recovery for this stock.


Chart 3: Topglov's daily chart as at Mar 16, 2011 (Source: Quickcharts)

Conclusion

Based on possible better performance in the near term, Topglov is a BUY on weakness.

BJToto's profit recovering

Results Update

BJToto reported a better set of results for QE31/1/2011. Its net profit increased by 77% q-o-q or 17% y-o-y to RM115 million while its turnover was relatively unchanged at about RM851 million. The higher net profit was attributable to higher profit contributed by Berjaya Philippines Inc. & sharply higher profit by Sport Toto due to a lower prize payout in the current quarter. The impact on the current quarter from the increase in Pool Betting Duty from 6% to 8% that was effective 1 June 2010 was mitigated by the reduction in the 4D Big Special Prize from RM200 to RM180 per RM1 bet with effect from 15 December 2010.


Table 1: BJToto's last 8 quarterly results



Chart 1: BJToto's last 26 quarterly results

Valuation

BJToto (closed at RM4.09 yesterday) is now trading at a PE of 12 times (based on annualized EPS of 34 sen). At this PE multiple, BJToto is deemed fairly attractive. With the slide in its net profit halted, BJToto could command a PE multiple of 14-15 times again.

Technical Outlook

BJToto is now resting at its long-term uptrend line support of RM4.00.


Chart 2: BJToto's weekly chart as at Mar 15, 2011 (Source: Tradesignum)

Conclusion

Based on improved financial performance, attractive valuation & technical outlook, BJToto is a good stock for long-term investment.

Tuesday, March 15, 2011

The calm before the storm?

At about 11.00am this morning, FBM-KLCI has again tested the strong horizontal support at 1475 and rebounded. This is a critical support level which must not be violated. If it is violated, I believe the market could enter into a sharp sell-off. See Chart 1 below.


Chart 1: FBM-KLCI's daily chart as at Mar 15, 2011_11.00am (Source: Quickcharts)

The index recovered back above the preferred uptrend line (SS) support of 1480 as at 11.30am. The alternative uptrend line (Sa-Sa) support is at 1450.


Chart 2: FBM-KLCI's daily chart as at Mar 15, 2011_11.00am (Source: Tradesignum)

Despite the poor market sentiment & difficult trading condition, one can take some comfort that our market is still holding up pretty well. If someone were to give you a scenario where crude oil prices traded above USD100 & most commodities, including foodstuff, were rising rapidly; the debt-ridden European nations again experiencing fresh problem; heightened geopolitical risks in the Middle East due to popular uprising; and finally a powerful earthquake in Japan that devastated a big city & a few nuclear power plants, you would probably call that a doomsday scenario. And, you would probably call your broker to dispose all your stocks (if you can get him on the line). Hi, wait a minute! Ain't we already in such a scenario now? Contrary to your expectation, the stock market has been behaving rather calmly. It dropped some but it wasn't a panic sell-off, except in Japan. Is the sell-off this morning the long-awaited start of the monsoon? Let's wait & see. I must admit that the calm reaction by the market to the plethora of bad news has been very encouraging. Is this what some called the new 'normal'- a market that is so conditioned to the easy money environment under Quantitative Easing 2, courtesy of a very accommodating Fed? When things behaved contrary to your expectation, you need to sit up & re-examine your assumptions. Some may recall the old Chinese saying: "What doesn't kill you, can only make you stronger. "

Note: The news flowing out from Japan is getting grimmer. Japan's nine nuclear reactors are under state of emergency with radiation spewing. Japan is facing a nuclear catastrophe, said The New York Times.

Nikkei to test its strong horizontal support of 9000 soon

As at 9.00pm EDT, Nikkei index dropped 578 points (or 6.03%) to 9040. This followed yesterday's sharp drop of 634 points (or 6.18%). We can see from the chart below that Nikkei index has just violated its 2-year uptrend line at 9300. It will soon test the strong horizontal support at the 9000 mark. I think this support level should hold & a decent rebound could set in.

Those who like to get into this play can look at some ETFs that track the Japanese stock market, such as:

DBXT MSJAP 10US$ (SGX Code: LF2)

The investment objective of the Fund is to track the performance of the Underlying Asset, which is The MSCI Total Return Net Japan Index

Lyxor Japan 10US$ (SGX Code: CW4)

The Fund’s investment objective is to provide investment results that closely correspond to the performance of the TOPIX® Index insofar as possible minimizing the tracking error between the Fund’s performance and that of the Index. The Fund aims to achieve a tracking error, calculated over a period of 52 weeks, of less than 1%. Should the tracking error be higher than 1%, however, the Fund still aims to achieve a rate of tracking error that is less than 5% of the volatility of Index .

Lyxor ETF Japan (TOPIX®) [HKEX Code: 2814]

Lyxor ETF Japan (TOPIX®) aims to achieve investment results that closely correspond to the TOPIX® Index insofar as possible minimizing the tracking error between the ETF's performance and that of the Index.



Chart: NIKK's daily chart as at March 14, 2011 (Source: Stockcharts)

Note: Nikkei broke below the 9000 level convincingly as at 11.30pm EDT. With this breakdown, it is advisable to avoid this trade. Those who have entered this trade earlier should cut their position.

Monday, March 14, 2011

Increased demand for Timber Products likely

One of the saddest picture that came out of the Great Earthquake in Sendai, Japan (& the subsequent Tsunami) last Friday was the huge amount of devastation to the homes of the residents as well as other properties. This damage will require enormous amount of building materials. One of the main building materials seems to be tropical hard wood.

I have appended below the 20-year chart for Sarawak Hard Log & Red Meranti Sawn timber for our perusal. We can that the prices of these 2 products are presently in an uptrend. A sudden increase in demand would lead to further increases in prices of the products. We can see when Kobe earthquake hit in 1995, the subsequent increased demand was able to sustain the prices of the same products for the next 2 years- despite these products having peaked earlier in 1993-1994.


Chart 1: 20-year price chart for Sarawak Hard Logs, Japan (Source: Mongabay)


Chart 2: 20-year price chart for Dark Red Meranti sawn timber (Source: Mongabay)

Below, I have appended the charts for 3 main timber stocks that may benefit from the increased demand in log & sawn timber. They are JTiasa, Lingui & WTK.


Chart 3: JTiasa's weekly chart as at Mar 7, 2011 (Source: Tradesignum)



Chart 4: Lingui's weekly chart as at Mar 7, 2011 (Source: Tradesignum)



Chart 5: WTK's weekly chart as at Mar 7, 2011 (Source: Tradesignum)

One timber stock that I've overlooked- TaAnn!


Chart 6: TaAnn's weekly chart as at Mar 7, 2011 (Source: Tradesignum)

Friday, March 11, 2011

Equity correction spread to developed countries

US stock markets dropped sharply overnight. According to a Bloomberg report, the drop was triggered by concern about a slowing economy- following an increase in jobless claims, a wider American trade deficit and a slowdown in China’s export growth. We can see from the charts below that the decline is not only confined to US equity but it has also spread over to UK & Germany as well as major commodity exporters, such as Australia & Canada. The only exception is Russia which may have benefited from the strong rally in crude oil. You would see that most of the indices have broken below their respective uptrend line. This bearish breakdown could further damper the poor sentiment in our stock market.


Chart 1: DJIA's daily chart as at Mar 10, 2011 (Source: Stockcharts)



Chart 2: S&P500's daily chart as at Mar 10, 2011 (Source: Stockcharts)



Chart 3: Nasdaq's daily chart as at Mar 10, 2011 (Source: Stockcharts)



Chart 4: FTSE's daily chart as at Mar 10, 2011 (Source: Stockcharts)



Chart 5: DAX's daily chart as at Mar 10, 2011 (Source: Stockcharts)



Chart 6: AORD's daily chart as at Mar 10, 2011 (Source: Stockcharts)



Chart 7: TSX's daily chart as at Mar 10, 2011 (Source: Stockcharts)



Chart 8: RTSI's daily chart as at Mar 10, 2011 (Source: Stockcharts)