RHBCap broke its uptrend line

RHBCap broke its long term uptrend line, S-S1 at RM8.20 in September 2011. Since then, it found support at a more gradual uptrend line, S-S2. At the end of July, RHBCap broke below this uptrend line at RM7.50. With this breakdown, the stock will soon test the psychological RM7.00 mark, which is not a strong support for the stock. Its strong support will be at the horizontal line at RM6.50 & then at RM5.50. Another potential support may come if the stock can form another gradual uptrend line, S-S3, which I would call the 3rd fan uptrend line. If that happens, the support from this yet-to-be-formed uptrend line would provide support at RM5.80-6.00. All in all, the stock should have multiple support between RM5.50 & RM6.50.

Fundamentally, RHBCap (at RM7.17) is fairly attractive as it is trading at a trailing PE of 9 times (based on annualized EPS of 80 sen) or trading at a Price to Book of 1.3 times (based on NTA of RM5.46 as at 31/3/2012). These multiple should be adjusted lower after the issuance of new shares in exchange for the acquisition of OSK Investment Bank. Even so, the multiples would not deteriorate substantially. RHBCap is still a relatively inexpensive banking stock.

Based on the latest breakdown, it is best to wait for RHBCap to find its support before buying this stock. That support may come at the psychological RM7.00 mark or more likely at the RM6.00-6.50 level. At the RM6.00-6.50 level, RHBcap is hard to resist.


Chart: RHBCap's weekly chart as at August 6, 2012 (Source: Tradesignum)