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Tuesday, May 31, 2011

TWS- top-line & bottom-line slipped

Results Update

TWS reported a disappointing results for QE31/3/2011. Its net profit 54% q-o-q to RM90 million on the back of a 8%-decline in turnover to RM1.46 billion. The decline in profitability was mainly due to lower production of fresh fruit bunches which is a norm in the oil palm industry in the early part of the year and lower contribution from Sugar Division.


Table: TWS's last 8 quarterly results



Chart 1: TWS's last 11 quarterly results

Valuation

TWS (closed at RM9.33 today) is now trading at a PE of 5.5 times (based on last 4 quarters' EPS of 169.74 sen). Based on this PE multiple, TWS is still very attractive.

Technical Outlook

A short-term downtrend has formed, with the presence of a lower 'low' which preceded a lower 'high'. TWS could find support at the 30-day SMA line at RM9.00 or the breakout level of the last rally (at RM8.00-8.10).


Chart 2: TWS's daily chart as at May 31, 2011 (Source: Quickcharts)

Conclusion

Based on attractive valuation, TWS is still considered a good stock for long-term investment. However, the poor financial performance- due to seasonal factor- and the poor short-term technical outlook should see the stock correcting further.

Market Outlook as at May 31, 2011

FBM-KLCI & FBM-Emas have both broken above their medium-term downtrend line (RR) at 1555 & 10700, respective. With these bullish breakouts, I expect the market to continue to rise.



Chart 1: FBM-KLCI's daily chart as at May 31, 2011_4.00pm (Source: Quickcharts)



Chart 2: FBM-Emas's daily chart as at May 31, 2011_4.00pm (Source: Quickcharts)

Based on the above, we can be more constructive in our trading or investment.

Tongher- top-line & bottom-line continued to grow

Results Update

For QE31/3/2011, Tongher's net profit increased by 88% q-o-q or 247% y-o-y to RM13 million while turnover increased by 14% q-o-q or 143% y-o-y to RM143 million. The improvement in top-line & bottom-line was attributable to overall improvement in sales & the consolidation of the accounts of the recently-acquired subsidiary, Tong Herr Aluminium Industries Sdn Bhd.


Table: Tongher's last 8 quarterly results



Chart 1: Tongher's past 26 quarterly results

Valuation

Tongher (closed at RM2.64 at end of morning session) is now trading at a PE of 6.5 times (based on annualized EPS of 40.92 sen). At this multiple, Tongher is deemed quite attractive.

Technical Outlook

Tongher has broken above its triangle at RM2.55 today. With this breakout, Tongher may test its horizontal resistance at RM2.80 & thereafter RM3.40.


Chart 2: Tongher's daily chart as at May 31, 2011_11.45am (Source: Quickcharts)



Chart 3: Tongher's monthly chart as at May 3, 2011 (Source: Tradesignum)

Conclusion

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

Petgas- no benefit from higher domestic natural gas price

Yesterday, the Government has announced that Petroliam Nasional Berhad (“PETRONAS”) will increase the price of natural gas from RM10.70 per million British thermal units (MMBtu) to RM13.70 per MMBtu from June 1, and thereafter by RM3 per MMBtu every six months until December 2015. This announcement has very little impact on Petgas.

The relation between Petgas &
PETRONAS is governed by the Gas Processing and Transmission Agreement (“GPTA”), whereby Petgas provides to PETRONAS the service of processing and transmission of gas to PETRONAS’ customers via the Peninsular Gas Utilisation (“PGU”) pipeline system. In consideration for the above services, PETRONAS agrees to pay Petgas a throughput fee which consists of the combination of processing and transportation of gas that covers reasonable capital costs and operating expenses.

Processing Remuneration Structure are as follows:

  • A guaranteed income from Reservation Charge,
  • Flowrate Charge income on incremental volume above an agreed threshold,
  • Ethane remuneration is based on cost recovery of Ethane produced to meet PETRONAS’ customers requirements and
  • 30% share of PETRONAS margin from the export sale of Propane and Butane.

In addition, PETRONAS shall provide the Natural Gas to Petgas for its Internal Gas Consumption (IGC) at no cost to Petgas provided that Petgas shall operate within the agreed operating parameter. If Petgas operates below the agreed operating parameter, Petgas will receive incentive payment from PETRONAS for the volume of IGC saved and if Petgas operates above the operating parameter, Petgas will pay to PETRONAS the excess volume of IGC. In both instances, the payment of Natural Gas will be based on PETRONAS Industrial Gas Tariff.

Transportation Remuneration Structure will be based on a zonal tariff determined by location of PETRONAS’ customers.

Details of the remuneration structure are as follows:

a. Processing Remuneration Structure

  • A fixed Reservation Charge of RM 103.5 million per month.
  • Flowrate Charge of RM 0.22 / GJ on incremental volume of gas processed or delivered above 2.1 BSCFD.
  • RM 43.47 per metric tonne of Ethane
  • 30% share of PETRONAS’ margin from the export sale of Propane and Butane.

b. Transportation Remuneration Structure

i. Peninsular Malaysia Operations

A Capacity Reservation Charge based on Transportation Tariff and Shipper’s Maximum Daily Quantity (MDQ). Transportation tariff are as follows:

  • Zone 1 (East) : RM0.543/GJ
  • Zone 2 (Southern) : RM1.434/GJ
  • Zone 3 (Central) : RM1.793/GJ
  • Zone 4 (North) : RM0.931/GJ

ii. Miri Operations

  • Flowrate Charge of RM 1.89 / MMBtu for gas delivered to PETRONAS’ customers.

iii. Bintulu Operations

  • A fixed Reservation Charge of RM 655,200 per annum
  • Flowrate Charge of RM 1.17 / MMBtu for gas delivered to PETRONAS’ customers.

From the above, we can see that Petgas can benefit from higher prices from only one item, ie. the 30% share of PETRONAS’ margin from the export sale of Propane and Butane. However, since this is an export sales, the price is currently governed by market price.So, Petgas would not benefit from the increase in natural gas prices as announced yesterday.

Monday, May 30, 2011

MAS- bites the dust

From 1994 to 2009, MAS share prices have been trapped within a giant symmetrical triangle. While there were a few downside breakout in late 2008 & early 2009, these breakdowns never developed into a sell-off as the share price hung on stubbornly to the lower boundary of the triangle.

In late 2009, MAS again broke to the downside of the triangle. Unlike previous breakdowns, MAS was unable to recover above the lower boundary of the triangle. However, the share price managed to stay above the RM2.00 level. Last week, MAS came under fierce selling pressure- 18 months after that breakdown. This sell-off has brought the share price to the present level of RM1.35. The next support at RM1.30 & if that failed, the stock may test its all-time low at RM1.00.


Chart 1: MAS's monthly chart as at May 29, 2011 (Source: Tradesignum)

Let's do a projection of the target for the current downside move. Assuming that this move is equivalent to the range of MAS share price over the past 2 years (of about 60 sen). The breakdown level was at RM1.60. Then, the target would be RM1.00.


Chart 2: MAS's weekly chart as at May 29, 2011 (Source: Tradesignum)

Based on technical analysis (projection studies included), I think MAS could have a decent rebound when the share price comes close to the RM1.00 level.

Ekovest- a River Runs Through It.

One of the top performer in early 2011 was Ekovest. It formed a JV with MRCB to set up KL Bund Sdn Bhd to carry out the River of Life Project, which is supposed to be part of the Givernment's Economic Transformation Programme (here).

Ekovest broke above the strong horizontal resistance at RM1.90 on December 29 & rose to a high of RM4.13 in February before correction set in. In mid-March, Ekovest had a bear rally which came very close to the RM4.00 mark before another bout of selling set in. This selldown has carried to stock to its current low of RM2.52. The next strong support is at the RM1.90-2.00 level.


Chart 1: Ekovest's daily chart as at May 30, 2011 (Source: Tradesignum)

We can get a different perspective by looking at Ekovest's monthly chart, plotted on log scale. From Chart 2 below, we can see that Ekovest's share price moved within an inverted semi-circle from 2002 until today. Its failure to break above the near-horizontal line, XY should lead to correction back to the semi-circular line, with support at around RM2.00.


Chart 2: Ekovest's monthly chart as at May 29, 2011_plotted on log scale (Source: Tradesignum)

Finally, you would agree that the retracement in Ekovest has been very significant. The stock rose from a low of RM1.60 in December 23, 2010 to a high of RM4.13 on February 10, 2011- a gain of RM2.53. At the close of RM2.52 today, Ekovest gave back RM1.61 of its gain or underwent a 63.6%-retracement. In Fibonacci retracement studies, a correction with retracement of 33% to 66% is normal & acceptable. Any retracement beyond 66% would raise serious doubt about the prospect of recovery. Ekovest is very close to the maximum retracement before investors throw in their towels.

As such, Ekovest is worth close tracking. Should we buy the stock now after a sharp fall or should we wait for the test of the RM1.90-2.00 support? If the stock were to drop to the RM1.90-2.00 support, the stock is a damaged good with poor prospect of recovery. Those holding the stock are in a very unenviable position- to hold or not to hold? There are many stocks that are putting investors in similar predicament. A River Runs Through All of Them: the River of Greed & Fear.

Asiafle- broke its long-term uptrend line

Results Update

For QE31/3/2011, Asiafle's net profit increased by 10% q-o-q or 8% y-o-y to RM12.6 million while turnover was up 11% q-o-q but dropped 10% y-o-y to RM65 million. The improved bottom-line was attributable to improvement in operation efficiency & successful passing of costs to customers.


Table: Asiafle's last 8 quarterly results



Chart 1: Asiafle's past 25 quarterly results

Financial Position

Asiafle's financial position as at 31/3/2011 is considered satisfactory with current ratio at 2.8 times & debts to equity at a negligible 0.1 time.

Valuation

Asiafle (closed at RM4.01 on May 27, 2011) is now trading at a PE of 9.1 times (based on last 4 quarters' EPS of 43.88 sen). Due to the declining sales & profitability over the past 3 years, this stock may not be able to command a PE multiple above 10 times. As such, its upside is very limited.

Technical Outlook

Asiafle has broken below its long-term uptrend line at RM4.40 in early May. last week, it broke below the horizontal line RM4.10. These double breakdowns cast a bearish outlook for Asiafle.


Chart 2: Asiafle's monthly chart as at May 27, 2011 (Source: Tradesignum)

Conclusion


Based on Asiafle's bearish technical outlook and struggling financial performance over the past 3 years, Asiafle is now rated as a SELL. This is despite the slight improvement in its bottom-line as noted above.

KNM- hanging onto its uptrend line... for now

On Friday, KNM reported its results for QE31/3/2011 which wasn't exciting nor disappointing. However, the share price plummeted 15% from RM2.53 to RM2.15! In the process, KNM broke through two horizontal lines (RM2.50 & RM2.20) and tested its medium-term uptrend at RM2.05-2.07 as well as the horizontal line at RM2.12 before rebounding to close at RM2.15. The volume for Friday was huge as 103 million shares were traded. This could be a sign that some big sellers have decided to exit this stock. Have they fully sold off their position? We don't know. I expect the share to remain weak for the next few days, possibly re-testing the uptrend line support again. If this support is not violated over the next few days, you may slowly buy into this stock for a rebound play.


Chart: KNM's daily chart as at May 27, 2011 (Source: Quickchart)

IJM- near-term price weakness expected

Results Update

IJM has announced a poor set of results for QE31/3/2011. Despite a 21%-increase in turnover, its pre-tax profit dropped 54% y-o-y due to the provision made against contractual claims, recovery of receivables and project losses, and lower FFB production and sales volume as a result of shift in cropping pattern. IJM incurred a net loss of RM20 million due to higher effective tax rate which was attributable mainly to current year deferred tax asset not recognized and expenses not deductible for tax purposes. For more, go here or here.

Technical Outlook


The drop in the bottom-line may cause some near-term weakness in IJM share price. IJM may test its uptrend line support at RM6.00-6.05. A break of this uptrend line could be quite bearish. Its next support would be the horizontal line at RM5.70-5.80. In addition, we can see that IJM is looking toppish after a long rally (see Chart 2). The monthly indicators have eased off or hooked down but we have yet to see the negative cross-under in the MACD indicator.


Chart 1: IJM's weekly chart as at May 27, 2011 (Source: Quickchart)


Chart 2: IJM's monthly chart as at May 27, 2011_plotted on log scale (Source: Tradesignum)

Conclusion


Based on poorer financial performance, we can expect some near-term weakness in IJM share price. If the share price were to drop below the RM6.00 level, the technical outlook would turn bearish.

Friday, May 27, 2011

Perstima- time to sell

Results Update

For QE31/3/2011, Perstima's net profit dropped by 54% q-o-q or 76% y-o-y to RM6.5 million while turnover dropped 7% q-o-q or 1% y-o-y to RM209 million. The drop in its bottom-line was attributed to lower profit margin due to competition from tinplate from China.


Table: Perstima's last 8 quarterly results



Chart 1: Perstima's past 27 quarterly results

Valuation

Perstima (closed at RM4.70 as at 12.30pm today) is now trading at a PE of 18 times (based on annualized EPS of 26.16 sen). Based on this multiple, Perstima is still overvalued. A fair value would be about RM3.90-4.00 (based on PE multiple of 14-15 times).

Technical Outlook

Perstima broke below its uptrend line in October 2010. It tried to rally back up above the uptrend line in November but failed. Since then, it has been moving sideway in a range between RM4.60 & RM5.40). Today, Perstima came under heavy selling pressure. If this selling persists & the support at RM4.60 is violated, Perstima would reverse into a downtrend.


Chart 2: Perstima's weekly chart as at May 26, 2011 (Source: Quickcharts)

Conclusion


Based on poor financial performance & overvaluation, I would rate Perstima as a SELL. This is especailly so if the RM4.60 support is violated.

Integra- bottom-line shored up

Results Update

For QE31/3/2011, Integra's net profit dropped 4.8% q-o-q to RM14.2 million on the back of a 2.5%-decline in turnover to RM22.2 million. When compared to the same quarter last year, its net profit was up 59.3% while turnover was lower by 3.6%.

While net profit dropped only marginally when compared to QE31/12/2010, we must note that current quarter number was boosted by gain on disposal of an associated company, Platinum Group Metals Corp ('PGMC') of RM722k; gain on disposal of a subsidiary company, P.T. Indoexchange Tbk ('IDNX') of RM1.926 million; and forex gain of RM2.496 million. If the 2 exceptional gain on disposal were excluded, Integra's net profit would drop by 23% q-o-q to RM11.5 million. For QE31/3/2011 & QE31/12/2010, Integra did not derive any contribution from either PGMC or INDX.


Table: Integra's last 8 quarterly results



Chart 1: Integra's past 16 quarterly results

Valuation

Integra (closed at RM1.49 yesterday) is now trading at a PE of 9.7 times (based on adjusted annualized EPS of 15.3 sen which is calculated using the adjusted net profit of RM11.5 million for QE31/3/2011 & outstanding issued shares of 300.8 million). At this multiple, Integra is deemed fairly valued.

Technical Outlook

Integra is in an accelerated uptrend (S1-S1) with support at RM1.32-1.33. We can see bearish divergence in the MACD & RSI indicators which may indicate toppish in the share price.


Chart 2: Integra's weekly chart as at May 26, 2011 (Source: Quickcharts)

Conclusion


Despite the decline in its continuing operation (after excluding exceptional gains), Integra is still rated a HOLD as it is not overvalued & it is still in an uptrend.

Genting- profit keeps rolling in

Results Update

Genting's net profit increased by 81% q-o-q or 255% y-o-y to RM824 million while turnover increased by 20% q-o-q or 57% y-o-y to RM4.889 billion. The improved bottom-line was attributable to higher earning from Resorts World in Sentosa which offset a lower earning from Resorts World Malaysia as well as higher earning from the Power division (due mainly to compensation from the Fujian provincial government in respect of an increase in tariff rate for the Meizhou Wan power plant).


Table: Genting's last 8 quarterly results



Chart 1: Genting's past 20 quarterly results

Valuation

Genting (closed at RM11.10 yesterday) is now trading at a PE of 14.7 times (based on last 4 quarters' EPS of 75.54 sen). Based on this multiple, Genting is deemed quite attractive. It certainly compared favorably to Las Vegas Sands which trades at a trailing PE of 53 times or a forward PE of 19 times (go here). One cannot compare Genting with MGM Resorts, which is a loss-making concern (go here).

Technical Outlook

Genting is in an uptrend line with support at RM10.80-10.90. Its upside may be capped by a medium-term downtrend line with resistance at RM11.72. If it can break above the downtrend line, Genting should continue with its prior uptrend.


Chart 2: Genting's daily chart as at May 27, 2011_10.30am (Source: Quickcharts)

Conclusion

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

GenM- benefitted from its UK operation

Results Update

GenM's net profit increased by 15% q-o-q or 53% y-o-y to RM418 million while its turnover increased by 25% q-o-q or 45% y-o-y to RM1.951 billion. The improvement is due to contribution from its UK casino operation.


Table: GenM's last 8 quarterly results



Chart 1: GenM's past 20 quarterly results

Valuation


GenM (closed at RM3.52 yesterday) is now trading at a PE of 14 times (based on last 4 quarters' ESP of 25 sen). At this multiple, GenM is deemed quite attractive.

Technical Outlook


GenM is still in an uptrend line, with support at RM3.50. Its immediate resistance is the horizontal line at RM3.65.


Chart 2: GenM's daily chart as at May 26, 2011 (Source: Quickcharts)

Conclusion

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

Thursday, May 26, 2011

MSC, Latexx & MISC- the good, the bad & the ugly

MSC

Supposedly the 'good' one, MSC has announced that it is looking to concession for 3-4 tin mines in Indonesia & Malaysia in order to tap in the strong demand for tin ore (go here). This announcement has prompted a sharp rally in the stock. My concern is whether MSC can execute this plan better than their last batch of acquisition in 2007-2008 which ended with huge write-off.

Latexx

Supposedly the 'bad' one, Latexx announced that it had received an offer letter from YTY Industry Holdings Sdn Bhd to merge four of the latter's wholly-owned subsidiaries with Latexx for a purchase consideration of RM1.37 billion. The proposed acquisition of YTY shall be settled by way of cash payment of RM409.5 million & issuance of 382.2 million Latexx shares valued at RM2.50 each. This would result in YTY gaining a controlling 63%-stake in Latexx. The proposed merger announcement came hot on the heels of the recently-aborted deal by Navis Asia VI Management Co Ltd and Mettiz Capital Ltd to take over Latexx. For more, go here.

I don't know what really prompted the collapse of one deal & the sudden arrival of the next deal but there are two questions that crossed my mind:
1) Why is the major shareholders of Latexx so eager to exit the company?
2) Why the major shareholders of YTY chose not to list YTY on the exchange by direct application instead of going through a back-door listing? The former is the cheaper route while the latter involved partnership issue & legacy concern.
The answers to both questions should give us reasons to be concerned about Latexx.

MISC

No prize for guessing which one is the 'ugly' one! MISC shareholders should take note that the shipping rates could remain in doldrums for quite a while, going by the comment made by the world's largest oil tanker operator, Frontline of Norway when it announced its results for 1Q2011. Its earning dropped 81% y-o-y due to low shipping rates.
The company issued a grim outlook: “It is hard to see a strong recovery in the tanker market as long as the net supply of tonnage grows faster than the total ton mile demand.” For more, go here.


Kianjoo- bonus issue canned?

Kianjoo's share price tumbled badly since May 23 when the news broke out that CanOne had filed court action to stop Kianjoo's proposed Bonus Issue & Warrant Rights Issue (go here). To recap, Can-One's wholly-owned subsidiary Can-One International Sdn Bhd, entered into a share sale agreement with Kian Joo Holdings Sdn Bhd to buy a 32.9% stake in Kianjoo for RM241.12mil or RM1.65 per share in April 2009 (go here). Subsequently, Kianjoo's Managing Director Datuk See Teow Chuan and 13 others filed a legal suit against Canone, claiming that the transaction was ‘’illegal’’.

CanOne is now taking court action to stop Kianjoo's proposed Bonus Issue & Warrant Rights Issue because it feared that its 'acquired' stake in Kianjoo may be diluted. I failed to see how the bonus shares would not be accrued to the acquirer otherwise all sorts of corporate exercise among listed companies would come to nought. It is the Warrant Rights Issue which may pose a problem because CanOne's share sale agreement with Kian Joo Holdings Sdn Bhd is to acquire the latter's stake in Kianjoo and one may argue that the new warrants to be issued is not part of the agreement. Alternatively, Kian Joo Holdings Sdn Bhd may sell off the warrant entitlement to parties friendly to the See family and thereby 'reduce' the stake to be acquired by CanOne. I have tabulated below the two scenarios:
1) Scenario A where CanOne controls the 32.9%-stake in Kianjoo as well as its entitlement for Warrant Rights Issue.
2) Scenario B where CanOne lost the entitlement for the Warrant Rights Issue.


Table: CanOne's Percentage Shareholding in Kianjoo

One more question to consider is whether the See family (whether reunited or still fragmented) can mount a fight to reclaim Kianjoo if CanOne can succeed in buying up the 32.9%-stake. The fact that the See family & CanOne is fighting over the proposed Bonus Issue & Warrant Rights Issue is a sign that there could be a shareholders' fight once CanOne takes control of the 32.9%-stake. The fight would be stacked against the See family & that's why they are maneuvering to trim down CanOne's eventual shareholding in Kianjoo.

Technically speaking, the correction over the past 3 days has actually brought the share price down to its uptrend line support of RM1.90-1.92. This coincides with the horizontal line at RM1.90.


Chart: Kianjoo's daily chart as at May 26, 2011_9.30am (Source: Quickcharts)

Based on attractive valuation & still positive technical set-up, Kianjoo remains a good stock for long-term investment. The CanOne's court action is a setback for those hoping to get some goodies in the near-term but for those with a longer investment time horizon, you may be rewarded by a potential shareholders' fight which should bring out the true value of this stock.

Tenaga- hope of price hike dashed

You would have probably guessed by now that Tenaga didn't get a tariff adjustment as speculated earlier. This comes from reading between the lines of yesterday announcement by the Government that there will be no fuel or gas price hike for now. The result of that announcement was an immediate correction in Tenaga share price, which dropped back to the downtrend line. The stock is likely to drop further and if it breaks below the RM5.90-6.00 support, we may see it dropping to the horizontal line of RM5.00. Except for extreme market condition, Tenaga tends to trade within the range of RM5.00 & RM8.00. See Chart 1 & 2 below.


Chart 1: Tenaga's daily chart as at May 25, 2011 (Source: Quickcharts)



Chart 2: Tenaga's monthly chart as at May 3, 2011_plotted on log scale (Source: Quickcharts)

How badly does Tenaga need a price hike? There is a story that the State Grid Corp of China said that it would shutdown some generators- reducing output by 40 gigawatts- because it is struggling with coal price increases of 75% while electricity rates have only risen by 15% since 2007 (go here). Tenaga may encounter a similar predicament in Malaysia even though a sizable portion of its power generation is powered by natural gas, which is subsidized by the Government.

Based on the above, Tenaga's trading BUY (as implied by my earlier post) is cancelled. It is best to avoid this stock for now. However, it can be a good trading stock or medium-term investment if the price were to drop to the RM5.00 mark.

Link

Wednesday, May 25, 2011

FIMACOR's top-line & bottom-line dropped q-o-q

Results Update

Fimacor's net profit dropped by 28% q-o-q to RM16.6 million on the back of a 9%-decline in turnover to RM68.5 million. However, net profit increased by 33% y-o-y despite a 17%-decline in turnover. From Chart 1 below, it looks like Fimacor's top-line has peaked 3-4 quarters ago while its bottom-line may be peaking now. We need to watch the next quarter's results to see whether a new trend has set in. If the bottom-line has peaked, the price of the stock would under-perform.


Table: Fimacor's last 8 quarterly results



Chart 1: Fimacor's past 14 quarterly results

Valuation


Fimacor (closed at RM6.40 yesterday) is now trading at a PE of 6.5 times (based on last 4 qaurters' EPS of 99 sen). At this multiple, Fimacor is deemed attractive.

Technical Outlook

Fimacor's uptrend has picked up pace over the past 2 years. We can see that its uptrend from 1998 to 2009 was within the pink upward channel. After it broke above the pink parallel line in early 2010, the share price rallied further. The current uptrend is better captured by the blue upward channel. In late 2010, Fimacor again broke above the blue parallel line as well as the all-time high of RM5.40. Recently, it hit a new all-time high of RM6.50.

Fimacor's immediate support is at the 10-month SMA line at RM5.77 which coincides with the blue parallel line. Its immediate resistance is the recent all-time high of RM6.50.


Chart 2: Fimacor's monthly chart as at May 24, 2011_plotted on log scale (Source: Tradesignum)

Conclusion


Based on attractive valuation & bullish technical outlook, I would rate Fimacor a HOLD. However, we need to track the financial performance of the company closely.

Petdag- sell into strength

Results Update

Petdag's net profit dropped by 3.3% q-o-q to RM228 million despite a 7.6%-increase in turnover to RM6.382 billion. The decline was attributable to higher operating expenditures. However, net profit increased by 41.8% y-o-y on the back of a 17.8%-increase in turnover.


Table: Petdag's last 8 quarterly results



Chart 1: Petdag's past 12 quarterly results

Valuation

Petdag (closed at RM15.60 at noon) is now trading at a PE of 17.8 times (based on last 4 quarters' EPS of 87.6 sen). At this multiple, Petdag is almost fully valued.

Technical Outlook

Petdag is in a long-term uptrend line, with support at RM9.00. The possible resistance posed by the parallel line (to the long-term uptrend line) is at RM18.00. The RSI has hooked down, which may be signally weakness ahead.


Chart 2: Petdag's monthly chart as at May 24, 2011_plotted on log scale (Source: Tradesignum)

Conclusion

As Petdag is trading near its fair value & may encounter possible resistance as it approach the RM18.00 level, we should consider selling into strength if & when it exceeds the RM16.00 mark.

MFlour- pre-tax profit dropped q-o-q


Results Update

MFlour's net profit increased by 5% q-o-q or 68% y-o-y to RM30.0 million while turnover increased by 39% y-o-y to RM459 million but was unchanged when compared to the immediate preceding quarter (QE31/12/2010). However it in worth noting that MFlour's pre-tax profit declined by 13.7% q-o-q to RM40.0 million due to a drop in profit margin. We need to track the company's results closely to see whether the drop in the pre-tax profit is an one-off event or is it the beginning of a trend.


Table: MFlour's last 8 quarterly results



Chart 1: MFlour's past 20 quarterly results

Valuation

MFlour (closed at RM6.98 at noon today) is now trading at a PE 7.8 times (based on the last 4 quarters' EPS of 90 sen). At this multiple, MFlour is deemed attractive.

Technical Outlook

MFlour broke above its all-time high of RM6.70 today. The possible resistance is the parallel line to the uptrend line, which is at RM7.50.


Chart 2: MFlour's monthly chart as at May 24, 2011_plotted on log scale (Source: Tradesignum)

Conclusion

Based on attractive valuation & bullish technical outlook, MFlour is still good for long-term investment.

MISC in a downtrend

Brief Background

MISC has been consolidating over the past 5 years. This is attributable to a decline in its financial performance over the past 5 years. See Tabble 1 below.


Table: MISC's last 5 years financial performance

The poorer financial performance is in turn attributable to a decline in shipping rates (due to overcapacity). See Chart 1 below.

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Chart 1: BDI rates as at May 24, 2011 (Source: Investmenttools.com)

Valuation

MISC (closed at RM6.69 yesterday) is now trading at a PE of 37 times. Needless to say, MISC is overvalued when compared to its FY2010 earning.

Technical Outlook

MISC consolidates within a symmetrical triangle (ABC). In early May, it broke to the downside of that triangle. Certain patterns are more prone to be continuation patterns while other more prone to be reversal patterns. To be a continuation pattern, the breakout must occur in the direction of the prior trend. So in the case of MISC, if the price breakout is to the upside (along the line 'AC'), it would be a continuation pattern and we would have a bullish breakout. Unfortunately, MISC broke to the downside (along the line 'BC'). This means we have a reversal pattern and a bearish breakout. This could lead to a prolonged downtrend for MISC. The stock may enjoy some support at the horizontal lines at RM6.60 (& then at RM5.60) but can any rebound sustain?


Chart 2: MISC's weekly chart as at May 24, 2011 (Source: Tradesignum)

From the monthly chart (plotted on log scale), we can see that MISC has also broken below its long-term uptrend line (SS) at RM8.00 in early May.


Chart 3: MISC's monthly chart as at May 24, 2011_plotted on log scale (Source: Tradesignum)

Conclusion

Based on poor recent financial performance, no sign of recovery in shipping rates, expensive valuation & bearish technical outlook, MISC is rated a SELL.

Note: As at 11.30am, MISC is trading at RM6.75.