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Wednesday, February 29, 2012

TWS- a poor all-round performance

Results Update

For QE31/12/2011, TWS's net profit dropped by 16% q-o-q or 37$ y-o-y to RM122 million while its turnover increased by 36% q-o-q or 46% y-o-y to RM2.28 billion. The pre-tax profit from the three main divisions declined- Rice from RM53 million to RM40 million; Plantation from RM144 million to RM139 million; and, Sugar from RM91 million to RM81 million. The decline in pre-tax profit was due to the following reasons:
- Rice division experienced higher Selling & Marketing expenses
- Plantation division experienced lower CPO prices & higher manuring cost
- Sugar division experienced increased production cost & other operating costs.


Table: TWS's last 8 quarterly results



Chart 1: TWS's last 14 quarterly results



Chart 2: TWS's profit margin for last 14 quarterly results

Valuation

TWS (closed at RM9.89 today) is now trading at a PE of 6.1 times (based on the last 4 quarters' EPS of 162.70 sen). At this PE multiple, TWS is deemed undemanding.

Technical Outlook

TWS is in an uptrend line, with support at RM10.00. It may have broken below this uptrend line today. If there is no recovery tomorrow or the next few days, TWS could continue to slide to test its immediate support at the horizontal line at RM9.00.


Chart 3: TWS's weekly chart as at Feb 27, 2012 (Source: Tradesignum)

Conclusion

Based on attractive valuation, TWS is still a good stock for long-term investment. The stock has however just broken below its uptrend line. We should wait & see whether it can recover above the RM10.00 mark. If not, it may slide to the next support at RM9.00, which could be a good entry to this consumer stable stock.

SEG- another good quarterly result

Results Update

For QE31/12/2011, SEG's net profit increased by 51% y-o-y but declined by 3% q-o-q to RM17.7 million. Its turnover increased by 25% y-o-y or 1% q-o-q to RM70.6 million.


Table: SEG's last 8 quarterly results



Chart 1: SEG's last 20 quarterly results

Valuation

SEG (closed at RM1.89 today) is now trading at a PE of 14.4 times (based on last 4 quarter's EPS of 13.15 sen). Given its strong earning growth of more than 100% over the past 3 years, SEG's PEG ratio is very low, at less than 0.2 time. However, we cannot assume SEG will continue with this fast pace of growth forever. Even at a reduced rate (say, 30%), SEG's PEG ratio would come in at only 0.5 time. As such, SEG is deemed very attractive.

Technical Outlook

SEG has been moving sideway for the past 10-11 moths. Its immediate resistance is the horizontal line at RM2.00.


Chart 2: SEG's weekly chart as at Feb 28, 2012 (Source: Quickcharts)

Conclusion

Based on satisfactory financial performance & attractive valuation, SEG is considered a good stock for long-term investment.

Canone- more attractive after the correction

Results Update

Canone announced its results for QE31/12/2011 yesterday. Its net profit increased by 62% q-o-q or 45% y-o-y to RM12.6 million while its turnover increased by 4% q-o-q or 27% y-o-y to RM167 million. The company attributed its improved bottom-line to changes in sales mix in the general can division, which saw its operating margin inched up from 9.0% foe QE31/12/2010 to 10.4% in QE31/12/2011. The operating margin for the other division (the food division) slipped from 5.0% to 4.5%.


Table: Canone's last 8 quarterly results



Chart 1: Canone's last 20 quarterly results

Valuation

Canone (closed at RM1.79 today) is now trading at a PE of 8.4 times (based on last 4 quarters' EPS of 21.4 sen). At this PE multiple, the stock is still undemanding. This is especially true if we were to factor in the contribution from the newly acquired stake in Kian Joo Can Factory Bhd.

Other Development

The stock corrected quite significantly over the past one month, probably due to the appeal filed by the See family (the previous major shareholders of Kian Joo) against the earlier decision on the Kian Joo case by the Federal Court. The ground of the appeal - plagiarism by the earlier Federal Court judges - seems unusual. Where does one draw the line between following a precedent & plagiarism? It would be pure madness for any judge to plagiarize after the recent brouhaha surrounding another case which was given much publicity (here). As such, I think the appeal is likely to fail.

Technical Outlook

From the intra day chart, we can see that Canone's recent correction is likely to have completed. In any event, the stock has good horizontal support at RM1.60 (see the weekly chart below).


Chart 2: Canone's 120-min chart as at Feb 29, 2012 (Source: Quickcharts)


Chart 3: Canone's weekly chart as at Feb 27, 2012 (Source: Tradesignum)

Conclusion

Based on satisfactory financial performance, attractive valuation, exciting prospect, Canone is a good stock for long-term investment.

Digista- good for a swing trade

In early February, I posted on the upside breakout for Digista (here). It rose to a high of RM0.64 & it has since dropped back to test its horizontal support at RM0.48. This support is also the 3rd fan uptrend line (S-S3) which must not be violated. A break below this 3rd fan trend line could spell the end of Digista's present uptrend.

Digista reported its results for QE31/12/2011 yesterday. Its net profit dropped 11.4% y-o-y to RM3.9 million while its turnover dropped 20.3% to RM22 million. Based on the annualized EPS of 7.0 sen, Digista at RM0.505 is trading at a PE of 7.2 times. For a small-cap stock, that PE is deemed reasonable.

If the stock can stay above the RM0.48 level, it could be a attractive stock for medium-term investment or a swing trade.


Chart: Digista's daily chart as at Feb 29, 2012_12.30pm (Source: Quickcharts)

Gold- continued to float higher


Gold is continuing on its prior uptrend. If you looked at the chart of gold priced in various currencies (here), you would see that gold had broken above its continuation pattern (mostly, probably a flag formation). The only chart where gold has not yet broken above that formation is when it is priced in Aussie dollar or Swiss franc.

The main reason for the continued strength in gold prices is the expectation of continued loose or easy monetary policies throughout the developed countries in order to combat deflationary fear or economic slowdown.


Chart: Gold's daily chart as at Feb 28, 2012 (Source: Stockcharts)

Tuesday, February 28, 2012

Some thoughts on charting

The market has been adrift for the past few days. I know that you know it only too well if you have been staring at the screen the whole day. While I had been saying that the market would be coming up against strong resistance for a while (okay, let's make that a long while!), you can never be too sure when it will consolidate or even reverse. Even today, the market could be going through a correction, albeit longer than what we have been accustomed too in the past 3-4 months.

We have to screen through our list of stocks & assess their technical outlook. Take the first two examples of Kianjoo & Sapcres . They have tested their uptrend line and rebounded slightly. That's good news!


Chart 1: Kianjoo's daily chart as at Feb 28, 2012 (Source: Quickcharts)



Chart 2: Sapcres's daily chart as at Feb 28, 2012 (Source: Quickcharts)

Note: Earlier, I had mistakenly identified Chart 2 as the daily chart for Timecom. Hat tip to David, who had highlighted this error to me.

Canone & Cocolnd have broken above their downtrend line and they are safe stocks to buy. Canone's chart is an intra-day chart, which may suitable for trading, while Cocolnd's chart is a weekly chart, which is more suitable for investing purpose.


Chart 3: Canone's 60-min chart as at Feb 28, 2012 (Source: Quickcharts)



Chart 4: Cocolnd's weekly chart as at Feb 28, 2012 (Source: Quickcharts)

Two of the recent strong runners, Mudajya & Unisem failed to surpass their downtrend line & are now drifting lower. If you have looked at the charts earlier, you could have taken profit when the stocks failed to surpass their downtrend line. Now, you can position to buyback these stocks at the various horizontal support levels.


Chart 5: Mudajya's weekly chart as at Feb 28, 2012 (Source: Quickcharts)



Chart 6: Unisem's weekly chart as at Feb 28, 2012 (Source: Quickcharts)

Make it a habit to look at the chart of the stock that you are interested in, before acting on your investment. Soon, it will become an unshakeable habit as you learn the usefulness of charting or technical analysis.

Parkson- playing the growth of Asian domestic demand

Results Update

For QE31/12/2011, Parkson's net profit increased by 17% q-o-q or 13% y-o-y to RM106 million while turnover increased by 15% q-o-q or 20% y-o-y to RM911 million. The increased turnover on y-o-y basis came mainly from the Chinese operation while its Malaysia operation saw a slight increase in turnover. The Indonesian operation, which recorded its maiden turnover, brought up the rear.

In term of segmental results, the Chinese division suffered a drop of RM16 million which was more than offset by higher segmental results from the Malaysian operation- an increase of RM17 million- and a maiden profit contribution of RM4 million from the Indonesian operation.


Table: Parkson's last 8 quarterly result



Chart 1: Parkson's last 20 quarterly results

Prospects

Parkson had expanded into two large markets in the past few quarters- Indonesia and Vietnam. These markets are expected to be the next area of growth for Parkson.

Valuation

Parkson (closed at RM5.58 yesterday) is now trading at a PE of 16.3 times (based on the last 4 quarters' EPS of 34.13 sen. At this PE, Parkson is deemed fairly valued.

Technical Outlook

Parkson's uptrend seems to have come to a halt over the past 2 years. Part of the reason for this could be the slowdown in its turnover over the past few years. This is however being addressed with the expansion into Indonesia & Vietnam. Once the bottom-line starts to rise again, the stock could enter into a new upleg.


Chart 2: Parkson's monthly chart as at Feb 2, 2012 (source: Tradesignum)

Conclusion

Based on exciting prospect, satisfactory financial performance & reasonable valuation, Parkson is a good stock to ride the Asian consumer play.

JTInter- top-line & bottom-line contracted due to trade normalization

Results Update

JTInter announced its results for QE31/12/2011 yesterday. Its net profit dropped 55% q-o-q or 34% y-o-y to RM18.1 million while turnover dropped 21% q-o-q or 4% y-o-y to RM266 million. The decline in turnover was due to the normalization of sales volume (where sales volume would rise just prior to the announcement of the fiscal budget - which was in the immediate preceding quarter - on speculation of a potential hike in excise duties or sales tax on cigarettes. If you compared the turnover for QE30/9/2011 & QE30/6/2011, the additional turnover is about RM30 million- which was borrowed from QE31/12/2011. Thus the drop of turnover of about RM30 million for QE31/12/2011 when compared to QE30/9/2011.

The lower sales for QE31/12/2011 led to a disproportionate decline in net profit due to higher marketing expenditures.

Table: JTInter's last 8 quarterly results



Chart 1: JTInter's last 20 quarterly results



Chart 2: JTInter's profit margin last 20 quarterly results

Valuation

JTInter (closed at RM6.93 at the end of the morning session) is now trading at a PE 14.7 times (based on last 4 quarters' EPS of 47 sen). At this PE multiple, JTInter is still deemed fairly attractive.

Technical Outlook

In December last year, JTInter hit a high of RM7.40, nearly equaled its June high of RM7.50. If we used the 10-month SMA line as the uptrend line, then JTInter has broken that uptrend line. The failure to surpass the June high plus the breakdown of the uptrend line could signal a change in the trend to sideway. The support for the stock will be the 20-month SMA line at RM6.50 & then at the psychological RM6.00 level.


Chart 3: JTInter's monthly chart as t Feb 2, 2012 (Source: Tradesignum)

Conclusion

Based on satisfactory financial performance & still attractive valuation, I would still consider JTInter a good stock for long-term investment. However, the technical outlook has turned cautious and the stock is likely to trade sideway for a while.

Monday, February 27, 2012

Latexx- Something don't smell right!


Results Update

Latexx's results for QE31/12/2011 disappoints many in term of the decline in both the top-line & bottom-line. Net profit declined by 93% q-o-q or 91% y-o-y to RM926k while turnover dropped by 26% q-o-q or 16% y-o-y to RM90 million. The drop in the bottom-line was due to the provision of RM7.6 million for settlement of claim with the Inland Revenue Board due to reassessment of income tax payable. The decline in turnover is due to slower sales arising from volatility of the raw material costs. I find the explanation for the decline in turnover to be unacceptable. You don't see Kossan or Topglov suffering from a decline in turnover because of volatility in raw material costs! Something is not right in Latexx!


Table: Latexx's last 8 quarterly results



Chart 1: Latexx's last 14 quarterly results

Valuation

Latexx (presently, at RM1.54) is trading at a PE of 8 times (based on last 4 quarters' EOS of 19.34 sen). Based on this PE multiple, Latexx's valuation is deemed undemanding.

Technical Outlook

Latexx has broken to the downside of its triangle at RM1.72 in early February. It also broke below its horizontal support at RM1.72 last Friday. Its next support is at the horizontal line at RM1.45.


Chart 2: Latexx's daily chart as at Feb 27, 2012_11.00am (Source: Quickcharts)

Conclusion

Based on unsatisfactory explanation for the decline in turnover & the bearish technical outlook, Latexx is a stock to avoid.

Harta- generous reward for its shareholders

Results Update

Harta has just announced its results for QE31/12/2011. Its net profit increased by 10% q-o-q or 3% y-o-y to RM50.7 million while its turnover rose 5% q-o-q or 29% y-o-y to RM241 million. The improved bottom-line was due to higher sales, which in turn was contributed by capacity expansion. While Harta's profit before tax & profit after tax margin had declined compared to the corresponding quarter last year, they have improved q-o-q from 25.9% to 26.4% & from 20.1% to 21.0%, respectively.


Table: Harta's last 8 quarterly results



Chart 1: Harta's last 17 quarterly results



Chart 2: Harta's profit margin for last 17 quarterly results

Other Development

Harta has announced a Bonus Issue of 1-for1 as well as a free warrant issue of 1-for-5. This generous capital exercise might explain the sharp rally in the share price over the past 6 weeks.

Valuation

Harta (closed at RM8.40 last Friday) is now trading at a PE 15 times (based on last 4 quarters' EPS of 56 sen). At this PE multiple, Harta is dalmost fully valued.

Technical Outlook

Harta broke above its strong horizontal resistance at RM5.85 in mid-January. While the share price may rally towards the ex-date of the proposed bonus issue of shares & warrants, the upside would probably be capped at RM9.00.


Chart 3; Harta's weekly chart as at Feb 24, 2012 (Source: quickcharts)

Conclusion

Based on satisfactory financial performance, strong management and fair valuation, Harta is a good stock for long-term investment. However, the stock's upside is limited for the near term after it had rallied about 40% in the past six weeks. As such, I would rate it a HOLD for now.

Rally in Rubber Glove Sector losing steam

Rubber prices have recovered somewhat after a sharp correction over the past one year. The earlier downtrend in rubber prices, coupled with the strengthening of the USD in second half of 2011, had given the rubber glove sector a much needed respite. We have seen a recovery in the share prices of a few rubber glove producers.


Chart 1: Rubber price chart as at Feb 24, 2012 (Source: Rubbernet)



Chart 2: USD price chart as at Feb 24, 2012 (Source: Stockcharts)

However, the weakening of the USD in the past two months (on fear of Fed's renewed loosening of its monetary policy in order to spur economic growth as well as to fight off the threat of deflation) and the small rebound in the rubber prices, had cut short the rally in the rubber glove sector. We can see that two of the rubber glove producers, Kossan & Supermx had broken their respective uptrend line while Topglov had pulled back to its uptrend line. How these stocks would fare depends on the cost of raw material (especially, rubber latexx) and the movement of USD.

While I believe the rubber glove sector had bottomed & could begin to rise on its next upleg, it is advisable to avoid adding aggressively our position in this sector due to the reasons stated above. The preferred strategy is slow accumulation as the share prices ease back to the next strong horizontal support (which is probably 10% away).


Chart 3: Kossan's daily chart as at Feb 27, 2012_10.00am (Source: Quickcharts)



Chart 4: Supermx's daily chart as at Feb 27, 2012_10.00am (Source: Quickcharts)



Chart 5: Topglov's daily chart as at Feb 27, 2012_10.00am (Source: Quickcharts)

CPO may have a bullish breakout

Plantation stocks had rallied over the past 4 months to test its all-time high in early 2008, at the 8900 mark (see Chart 2). Plantation stocks are currently experiencing a mild correction. From Chart 1, we can see that the medium-term uptrend line support for Plantation index is at 8600. If that support is violated, the index's next support will be the horizontal line at 8000.

The recent rally in Plantation index was achieved even without a substantial rise in the prices of CPO. CPO prices broke above its intermediate downtrend line in November and since then, it has been consolidating in an ascending triangle. And, yet we have seen substantially better financial performance for many plantation companies during the current reporting season. We can only conclude that these companies must have benefited from increased production of FFB.

Imagine how the plantation stocks will perform if CPO prices were to rally. Today, CPO has just broken above the ascending triangle at RM2560. CPO futures contract for April is currently trading at RM3275- a gain of RM14.

Based on bullish breakout for CPO prices, we should maintain our bullish stance for plantation stocks.


Chart 1: Plantation's daily chart as at Feb 27, 2012_10.30am (Source: Quickcharts)



Chart 2: Plantation's weekly chart as at Feb 27, 2012_10.30am (Source: Quickcharts)



Chart 3: CPO's weekly chart as at Feb 24, 2012 (Source: iFS.marketcenter.com)

Friday, February 24, 2012

Maybank had another good quarter!

Results Update

Maybank has just announced its results for QE31/12/2011. Its net profit increased by 0.8% q-o-q or 15.2% y-o-y to RM1.297 billion while its revenue increased by 12% q-o-q or 31% y-o-y to RM6.810 billion.


Table: Maybank's last 8 quarterly results



Chart 1: Maybank's last 25 quarterly results

Valuation

Maybank (closed at RM8.70 yesterday) is now trading at PE of 13.2 times (based on last 4 quarters' EPS of 66 sen). I think that is an undemanding valuation given its earning growth of 13% over the past one year (with, PEG ratio of 1 time). I feel that Maybank could command a PE of 15 times; thus a potential upside of 14%. Maybank pays a dividend totaling 68 sen over the past 4 quarters, which translated into a dividend yield of 7.8%.

Technical Outlook

Maybank has broken above its intermediate downtrend line at RM8.60 last week. Its next resistance is at RM9.00. If it can break above the RM9.00 resistance, it may rally to RM10.00.


Chart 2: Maybank's weekly chart as at Feb 23, 2012 (Source: Tradesignum)

Conclusion

Based on continued satisfactory financial performance & undemanding valuation, Maybank could be a good stock for medium-term investment.

Wednesday, February 22, 2012

Market Outlook as at February 22, 2012

Our market has risen quite substantially over the past 5 months. If you looked at all the charts below, you can see that we are either at the 2011 high or not far from there. The recent high will pose strong resistance which can cap the current rally. The right strategy is to reduce your position or take some profit & buyback when the consolidation happens. However, if the market can charge through this resistance, then we should quickly jump back in.


Chart 1: FBMKLCI's weekly chart as at Feb 22, 2012 (Source: Quickcharts)



Chart 2: FBMSCAP's weekly chart as at Feb 22, 2012 (Source: Quickcharts)



Chart 3: FBMACE's weekly chart as at Feb 22, 2012 (Source: Quickcharts)



Chart 4: FBMFLG's weekly chart as at Feb 22, 2012 (Source: Quickcharts)

Fimacor- Top-line & bottom-line slid further

Results Update

Fimacor reported another disappointing quarterly results for QE31/12/2011. Its net profit dropped 33% q-o-q or 51% y-o-y to RM11 million while its turnover dropped by 11% q-o-q or 12% y-o-y to RM67 million (see table 1). The q-o-q decline was due to a drop in the segmental results for the Security printing segment of RM10.7 million. For more on the segmental results for the past 3 quarters, see Table 2. What is most noticeable is the poor performance of the Oil palm prodution & processing segment, which is contrary to the gung-ho performance of other oil palm players.


Table 1: Fimacor's last 8 quarterly results



Table 2: Fimacor's last 3 quarterly segmental results



Chart 1; Fimacor's last 17 quarterly results

Valuation

Fimacor (closed at RM6.23 today) is trading at a PE of 7 times (based on last 4 quarters' EPS of 89 sen). At this PE, Fimacor's valuation is deemed demand.

Technical Outlook

Fimacor broke the horizontal support at RM6.50 today. Its next support will be the psychological RM6.00 level & then the horizontal support at RM5.70.


Chart 2: Fimacor's weekly chart as at Feb 2, 2012 (Source: Tradesignum)

Conclusion

Based on undemanding valuation, Fimacor is still a good stock for long-term investment. However, the surprisingly poor performance of its oil palm division is a concern. I would rate this stock a HOLD or a BUY ON WEAKNESS, say ay RM5.70-6.00.