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Tuesday, April 30, 2013

Steel stocks- poised for recovery


In addition to SSteel, I believe that we can consider other steel stocks for medium to long-term investment due to the improvement in the industrial outlook. I have tabulated a few steel stocks for consideration.


Table: Steel stocks' valuation

I have highlighted the stocks with dividend yield ('DY') exceeding 5%; PE below 10 times; and PB below 1 time. All the stocks are trading at PB below 1 time. Three stocks have DY exceeding 5% (Annjoo, CSCStel & SSteel). Out of the 3 profitable steel producers (Masteel, SSteel 7 CSCStel), only one stock is trading at PE below 10 times (that's Masteel). Masteel & CSCStel remained profitable in FY2012 as they have small exposure to the steel wire rod sector that was badly affected by dumping activities. As such, they will not benefit as much as from the anti-dumping move by the government as the other steel stocks.


Chart 1: Perwaja's wdaily chart as at April 29, 2013 (Source: quickcharts)


Chart 2: Kinstel's daily chart as at April 29, 2013 (Source: quickcharts)


Chart 3: Masteel's daily chart as at April 29, 2013 (Source: quickcharts)


Chart 4: CSCStel's daily chart as at April 29, 2013 (Source: quickcharts)


Chart 5: Annjoo's daily chart as at April 29, 2013 (Source: quickcharts)

To ride on the recovery of the steel stocks, we need to position in stocks that had been deeply oversold, such as Annjoo and Masteel. Masteel is trading at a low PE because investors are not avoiding the stock due to its venture into a monorail project in Johor Bahru. This new venture entails different kind of risk and investors are worried that the company might fail in that venture.

Annjoo is a strong steel company, which had done very well when steel product cycle recovers.It is forming a base at RM1.20 - albeit trading below that level in the past few days. Is this a breakdown? Can it recover above the RM1.20 mark again? If it can stay above RM1.20 mark, Annjoo could be a good stock to get into for the recovery play in steel iron rod & related steel-based building material.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Annjoo, Kinstel, Perwaja, SSteel, Masteel & CSCStel.

SSteel- a temporary bottom in place?

Result Update
SSteel returned to the black in QE31/3/2013, with a net profit of RM18.3 million on the back of a revenue of RM725 million. The improved performance was attributable to higher sales volume & better selling prices.


Table: SSteel's last 8 quarterly results


Chart 1: SSteel's last 28 quarterly results

Industrial outlook

SSteel, a major steel wire rod producer, is expected to benefit from the government's decision to impose anti-dumping duties against some exporters, particularly those from China. With the imposition of such duties, the selling prices of steel wire rod produced locally should improve. In addition, the price of iron ore, which had risen for the past few months, appears to have peaked in the past few weeks. These two favorable factors could see SSteel recording better results in the next few quarters.


Chart 2: Steel Wire Rod & Iron Ore price charts for past 5 years to March 2013 (Source: Indexmundi)

Valuation

SSteel (closed at RM1.38 yesterday) is now trading at a PE of 14 times (based on last 4 quarters' EPS of 10 sen). However, if we annualized SSteel's earning based on its latest result, then its future EPS could be 17.6 sen and its future PE would be 7.8 times. It is currently trading at a Price to Book of 0.67 times (based on its NTA of RM2.07 as at 31/3/2013). Based on these PE & PB multiples, SSteel is deemed fairly attractive.

Technical Outlook

SSteel has been in a downtrend for the past 3 years. It may have formed a base at RM1.30-1.35 level. If the earning for the stock continues to improve, the share price should rebound to test the downtrend line (S1-S1) at RM1.65-1.70.


Chart 3: SSteel's daily chart as at April 29, 2013 (Source: quickcharts)

Conclusion

Based on improving financial performance & relatively attractive valuation,SSteel could be a good stock for long-term investment. However, its technical outlook has not turned positive- albeit a temporary base formed at RM1.30-1.35- and buying, if any, should be gradual.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, SSteel.

Friday, April 26, 2013

Tomypak- following in the path of Daiboci

Tomypak is in the same packaging business as Daiboci. The chart of both stocks are fairly similar, with Daiboci taking the lead. The daily charts of these stocks are appended below.

Based on its breakout above the recent high of RM1.30, Tomypak could be a good trading BUY. Potential target for this move is RM1.80.

For easy comparison, I have grouped the charts by period.


Chart 1: Tomypak's daily chart as at Apr 25, 2013 (Source: Quickcharts)

 
 Chart 2: Daiboci's daily chart as at Apr 25, 2013 (Source: Quickcharts)

 
Chart 3: Tomypak's weekly chart as at Apr 25, 2013 (Source: Quickcharts)


Chart 4: Daiboci's weekly chart as at Apr 25, 2013 (Source: Quickcharts)

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Tomypak & Daiboci.

JOBST- the next upleg has started

Jobst has just broken above its all-time high at RM2.90. With this upside breakout, Jobst's next upleg has started. If Jobst's current move is equivalent to the distance between the recent low of RM2.10 & the breakout level of RM2.90, then the price target for the current move would be RM3.70.

Based on technical breakout, Jobst could be a good trading BUY.


Chart: JOBST's monthly chart as at Apr 26, 2013_11.50am (Source: Quickcharts)

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, JOBST.

Daiboci- bottom-line improved marginally



Result Update

For QE31/3/2013, Daiboci's net profit rose 14% q-o-q or 39% y-o-y to RM7.1 million while revenue was mixed, up 7% y-o-y but declined marginally by 1% q-o-q to RM74 million. The increased net profit was due to better performance from its two segments, where the Property segment recorded higher pre-tax profit of RM324k in QE31/3/2013 from a mere RM35k in QE31/12/2012 and the Packaging segment saw a small drop in revenue from RM72.9 million to RM71.6 million but a better pre-tax profit of RM9.18 million as compared to RM8.65 million in the immediate preceding quarter (due to favorable sales mix and lower raw material cost).


Table: Daiboci's last 8 quarterly results


Chart 1: Daiboci's last 22 quarterly results

Valuation

Daiboci (closed at RM3.10 yesterday) is now trading at a PE of 13.2 times (based on last 4 quarters' EPS of 23.48 sen). At this PE, Daiboci is deemed fairly valued, with limited upside.

Technical Outlook

Daiboci broke above its recent high of RM2.88 yesterday. This indicates that the stock may continue with its current uptrend.

 
 Chart 2: Daiboci's daily chart as at April 25, 2013 (Source: quickcharts)


Chart 3: Daiboci's weekly chart as at April 25, 2013 (Source: quickcharts)

Conclusion

Based on good financial performance & positive technical, Daiboci remains a good stock for long-term investment. However, it is trading at its fair value where its medium-term upside potential may be limited.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Daiboci.

Thursday, April 25, 2013

NCB- mixed results for QE31/3/2013

Result Update
For QE31/3/2013, NCB's net profit increased 49% q-o-q but dropped 29% y-o-y to RM35 million while revenue declined by 2% q-o-q or 5% y-o-y to RM231 million. Lower revenue is attributable to lower container throughput handled by Northport. The bottom-line rebounded q-o-q due to increase in certain expenses incurred in QE31/12/2012. When compared to the same quarter last year, bottom-line dropped due to increase in the cost of servicing new businesses in the logistics division.


Table: NCB's last 8 quarterly results


Chart 1: NCBs last 20 quarterly results

Dividend Payout

Investors have been rewarded by bumper dividend over the past 5 years. The last two big payouts were:
  • 56 sen in QE31/3/2012 when its bank balances stood at RM674 million; and
  • 59 sen in QE31/3/2011 when its bank balances stood at RM896 million
In the past 2 quarters, NCB did not announce a big payout. Is it be due to the 'small' cash pile of RM276 million? Even a special dividend of 30 sen would entail a payout of RM235 million and I doubt NCB would want to reduce its bank balances below RM100 million.  So, the days of bumper dividend payout is over.


Chart 2: NCB's Dividend Payout over past 5 years

Valuation

NCB (at RM4.60 as at 11.00am) is now trading at a PE of 14.6 times (based on last 4 quarters' EPS of 31.5 sen). At this PE, NCB is still reasonably valued, though the upside is limited.

Technical Outlook

NCB is still in an uptrend. If we use the 100-day SMA line as the proxy for the uptrend line, then the support for the stock is at RM4.48-4.50.


Chart 3: NCB's daily chart as at Apr 25, 2013_11.00am (Source: quickcharts)

Conclusion

Despite the decline in its financial performance over the past few quarters and the low prospect of big dividend payout, NCB is still a reasonably valued stock involved in a stable industry. Its technical outlook is still positive and on that basis, I would rate the stock a HOLD.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, NCB.

PWROOT- uptrend is likely to continue

PWROOT has just broken above its recent high of RM1.60. With this breakout, PWROOT is likely to continue its prior uptrend. Its next target may be RM1.80-1.90.

Based on this, PWROOT could be a good trading BUY.


Chart: PWRoot's daily chart as at Apr 24, 2013_10.00am (Source: quickcharts)

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, PWRoot.

Wednesday, April 24, 2013

Redtone- black is better than red!


Background

Redtone International Bhd ('Redtone') is slowly recovering from its loss-making streak over the past 3-4 years. The turnover was achieved by disposal of its loss-making businesses and repositioning itself in the data & broadband space. For more, check out this article in The Edge newsletter.

Result Update

For QE28/2/2013, Redtone reported a net profit of RM3.9 million- a slight decline of 1.3% q-o-q but a 8-fold improvement over the same quarter last year. Revenue soared 52% q-o-q or 72% y-o-y to RM40.5 million.


Table: Redtone's last 8 quarterly results


Chart 1: Redtone's last 8 quarterly results

Financial Position

As at 28/2/2013, redtone's financial position is deemed healthy with current ratio at 1.2 times while gearing ratio is negligible, with bank borrowing of RM2 million as compared to Shareholders' Funds of RM97 million. Cash & bank deposits amount to RM34 million.

Valuation

Redtone (closed at RM0.415 yesterday) is now trading at a trailing PE of 19 times (based on last 4 quarters' EPS of 2.18 sen. I expect Redtone's current earning to improve to 3.5-4.0 sen; thus bringing down PE to 11-12 times.

Technical Outlook

Redtone is in an intermediate uptrend line, S1-S1. It is poised to test its recent high of RM0.45 while its immediate support is the horizontal line RM0.42 (see Chart 2). An upside breakout above RM0.45 could send the stock to RM0.82. (see Chart 3).



Chart 2: Redtone's daily chart as at April 24, 2013_4.00pm (Source: quickcharts)


Chart 3: Redtone's monthly chart as at April 24, 2013_4.00pm (Source: quickcharts)

Conclusion
Based on the turnaround story, exciting future prospects (supported by recent financial performance) and potentially positive technical outlook, Redtone could be a good stock for long-term investment.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Redtone.

BAT- bottom-line inched up

Result Update
For QE31/3/2013, BAT's net profit increased by 4% q-o-q or 5% y-o-y to RM204 million while revenue rose 5% y-o-y but unchanged q-o-q at RM1.096 billion. Revenue increased y-o-y due to higher contract manufacturing volume (+RM94 million) which was partially offset by lower domestic volume (-RM41 million). Operating profit rose 3.8% y-o-y due to 24.2%-drop in operating expenses (such as RM12 million decline in timing of merchandising & branding expenses and the absence of reforestation impairment expenses of RM8 million).


Table: BAT's last 8 quarterly results


Chart 1: BAT's last 25 quarterly results

Valuation

BAT (closed at RM62.46 yesterday) is now trading at a PE of 22 times (based on the last 4 quarters' EPS of 283 sen). BAT paid out a dividend of RM2.75 for the last 4 quarters; thus giving a Dividend Yield of 4.4%. While BAT is deemed fully valued as per its PE multiple, it is still a good stock to own for income.

Technical Outlook

BAT is in an uptrend but its uptrend is now capped by the overhead line connecting the recent peaks (at RM67.00. Until a breakout is attained, BAT is likely to trade sideway with an upward bias.


Chart 2: BAT's daily chart as at April 23, 2013 (Source: quickcharts)

Conclusion
Based on good financial performance and good dividend payout, BAT is a good income stock for long-term. However, its valuation is elevated and the technical outlook is neutral. My rating for BAT is HOLD.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, BAT.

Spritzr- bottom-line slipped on higher raw materail & labor cost


Result Update

For QE28/2/2013, Spritzr's net profit dropped 2% q-o-q but rose 36% y-o-y to RM5.0 million while revenue rose 22% q-o-q or 26% y-o-y to RM57 million. Pre-tax profit dropped 10% q-o-q due to an increase in PET resin prices.  The performance of the current quarter was also impacted by the higher employee benefit expenses as a result of the minimum wage implementation effective 1 January 2013. Revenue increased 22% q-o-q due to the increase in sales volume of bottled water.


Table: Spritzr's last 8 quarterly results


Chart 1: Spritzr's last 27 quarterly results

Valuation

Spritzr (at RM1.20 as at 11:00am) is now trading at a PE of 10.3 times (based on last 4 quarters' EPS of 11.7 sen). For a consumer staple, Spritzr is deemed very attractive.

Technical Outlook

Spritzr has broken above the 'handle' of the reliable technical formation known as the "Cup-with-handle". The only shortcoming is the lack of volume to confirm this breakout. Hopefully the stock will recruit sufficient buying support to launch into orbit.


Chart 2: Spritzr's daily chart as at April 23, 2013 (Source: quickcharts)

Conclusion

Based on good financial performance (albeit a small drop in bottom-line), attractive valuation & positive technical outlook (albeit a lack of volume), Sprritzr is a good stock for trading BUY as well as long-term investment.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Sprtizr.

Tuesday, April 23, 2013

PBBank- earning growth slowed down by higher personnel cost

Result Update
For QE31/3/2013, PBBank's net profit dropped 2.4% q-o-q but increased 2.9% y-o-y to RM968 million while revenue increased 1% q-o-q or 9% y-o-y to RM3.673 billion. Net profit dropped slightly q-o-q due to higher personnel costs and lower other operating income.


Table: PBBank's last 8 quarterly results

From the chart below, we can see that PBBank's profit margin has been sliding for the past 2 years. The lower profit margin has capped the group's bottom-line during the period.


Chart 1: PBBank's last 29 quarterly results

Valuation

PBBank (closed at RM16.32 yesterday) is now trading at a PE of 14.7 times (based on last 4 quarters' EPS of 111 sen). At this PE multiple, PBBank is deemed reasonably priced, with potential to command a PE of 16-17 times.

Technical Outlook

PBBank is still in an uptrend..


Chart 2: PBBank's monthly chart as at April 23, 2013 (Source: quickcharts)

Conclusion

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

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, PBBank

DIGI- bottom-line recovered due to lower depreciation

Result Update
For QE31/3/2013, DIGI's net profit rose 34% q-o-q or 2% y-o-y to RM329 million while revenue rose marginally by 1% q-o-q or 5% y-o-y to RM1.647 billion. Improved bottom-line was attributable to lower accelerated depreciation as the network modernisation is coming closer to completion in Q3 2013, and was partially off-set by higher cost of handsets in line with higher take-up of device-bundled offerings.


Table: DIGI's last 8 quarterly results


Chart 1: DIGI's last 22 quarterly results

Valuation

DIGI (closed at RM4.67 yesterday) is now trading at a PE of 30 times (based on last 4 quarters' EPS of 15.62 sen). At this multiple, DIGI is deemed overvalued.


Technical Outlook

While DIGI is still in a long-term uptrend, the indicators have turned down. This is a sign that the stock is likely to trade sideway or lower for a while.


Chart 2: DIGI's monthly chart as at April 23, 2013 (Source: quickcharts)

Conclusion

Based on unattractive valuation & weak technical outlook, DIGI is rated a SELL.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, DIGI.

Monday, April 22, 2013

AEONCR- higher profit, higher share price

Result Update

For QE20/2/2013, AEONCR's net profit rose 12% q-o-q or 41% y-o-y to RM39 million while revenue rose by 8.5% q-o-q or 39.7% y-o-y to RM132 million.  The q-o-q improvement in pre-tax profit was due mainly to growth in receivables and increased financing transaction volume in the period.


Table: AEONCR's last 8 quarterly results


Chart 1: AEONCR's last 27 quarterly results

Valuation

AEONCR (closed at RM14.70 last Friday) is now trading at a PE of 15.6 times (based on last 4 quarters' EPS of 94.3 sen). Based on earning CAGR of 40-50% (over the pst 3 years), AEONCR is deemed reasonably valued, with potential to command a PE of 17 times. On that basis, AEONCR may continue to rise to RM17.00.

Technical Outlook

AEONCR has recently broken above its recent high of RM13.50. With this breakout, the stock is expected to continue its prior uptrend.


Chart 2: AEONCR's weekly chart as at April 19, 2013 (Source: quickcharts)

Conclusion

Based on good financial performance, reasonable valuation & positive technical outlook, AEONCR remains a good stock for long-term investment.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, AEONCR>

Zhulian- bottom-line slipped, uptrend capped

Result Update

For QE28/2/2013, Zhulian's net profit dropped 5.0% q-o-q but rose 4.8% y-o-y to RM30 million while revenue declined by 7.2% q-o-q or 2.8% y-o-y to RM109 million. The decline in bottom-line q-o-q was attributable to lower operating profit from RM24.1 million for QE30/11/2012 to RM22.7 million for QE28/2/2013 (which is in turn due to a slight drop in domestic sales) and a decline in share of profit of equity-accounted investee (net tax) from RM13.3 million for QE30/11/2012 to RM12.6 million for QE28/2/2013.


Table: Zhulian's last 8 quarterly results


Chart 1: Zhulian's last 26 quarterly results

Valuation

Zhulian (closed at RM2.89 last Friday) is now trading a PE of 11.2 times (based on last 4 quarters of 25.8 sen). Zhulian is deemed attractive based on earning CAGR of 15-20%.

Technical Outlook

Zhulian  is in an uptrend but the share price is capped by the recent high of RM2.90. Can the stock surpass this resistance soon? We will be wait & see.


Chart 2: Zhulian's weekly chart as at April 19, 2013 (Source: quickcharts)

Conclusion

Based on good financial performance, attractive valuation & still-positive technical outlook, Zhulian is still a good stock for long-term investment. However, the share price performance will be capped for the near term until it has surpassed its recent high of RM2.90.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Zhulian.

Thursday, April 18, 2013

Market Outlook as at April 18, 2013

FBMKLCI has managed to stay above the 1700 level for the past few days (see Chart 1). If FBMKLCI can stay above its previous all-time high, then the market may continue its uptrend. In July 2011, FBMKLCI broke above its then all-time high of 1573 (denoted as 'A' on Chart 2) but it failed to stay above its breakout level and succumbed to profit-taking.


Chart 1: FBMKLCI's daily chart as at Apr 18, 2012_3.30pm (Source: Quickcharts)


Chart 2: FBMKLCI's weekly chart as at Apr 18, 2012_3.30pm (Source: Quickcharts)

Besides the Property index, three other sectoral indices have broken above their previous all-time high. These indices are Trading Services (due in part to a strong move by Tenaga), Finance and Consumer. I am encouraged that the upside breakout in FBMKLCI is accompanied by similar breakout in Trading Services and Finance indices. We will have to wait for a short while longer to see whether the market can continue its uptrend.


Chart 3: Trad Serv's weekly chart as at Apr 17, 2012  (Source: Quickcharts)


Chart 4: Finance's weekly chart as at Apr 17, 2012  (Source: Quickcharts)


Chart 5: Consumers weekly chart as at Apr 17, 2012  (Source: Quickcharts)

The consumer sector has continued to rise, driven by rising income & consumption. However, many of the blue chips in that sector are trading at high PE multiples. The recent profit-taking in the consumer sector in the US is a sign that smart moneys are not impervious to taking some chips off the table when stocks trade at high PE multiples. A report in Clusterstock noted that Buffet, Paulson & Soros had reduced their exposure to consumer stocks, probably betting that US consumers may not have the spending power to drive earning higher. Would the same thing happen to Malaysian consumers? Among the Malaysian consumer stocks, I prefer YeeLee (or, Spritzr).

Finally, I like to note that the ability of our index to stay above the 1700 mark is quite commendable, given the uncertainty in the upcoming General Election as well as the developing risk-off trade which has sent many equity market swooning as well as flooring almost the entire commodity asset class. In view of the increased volatility (and more to come), we should exercise careful discretion in this market.