Friday, March 14, 2014

Puncak: Time to Harvest?!

In 2012 & 2013, I highlighted the deep discount in Puncak and posited that it could be a good recovery play. Back then, I was merely thinking of a recovery to RM2.00-2.30. See my posts in January 2012 & April 2013. If you look at this chart from the April 2013 post, you can see that beyond the RM2.00-2.30 the stock has strong resistance at RM3.00-3.30.

In the past 15 months, Puncak did in fact put in a recovery - a very strong recovery - where the share price went past the RM2.00-2.30 level as well as the RM3.00-3.30 level. It hit a high of RM3.60 in December last year before profit-taking set in and the stock dropped to a low of RM2.80 in January this year. It rebounded back to the high of RM3.60 last month (February).

As Puncak again comes under selling pressure after reports indicating that the Federal Government has invoked Section 114 of the Water Services Industry Act (Wasia) 2006 in acquiring Selangor water assets from concessionaires. The invocation of this provision means arbitration is the only option available for setting the takeover price for the assets to be acquired. Following the report, Selangor government was also reported to have reduced its offer (to buy over these assets) to RM7.6 billion from RM9.6 billion previously. For more, go here.

Investors will have to decide; to sell or not to sell. The dilemma is reflected in 2 conflicting reports where CIMB has downgraded Puncak's TP from RM4.16 to RM3.31 while RHB has maintained its TP for Puncak at RM5.22.

I believe that it is time to take profit on Puncak by adopting a SELL INTO STRENGTH if the stock rebounds back to RM3.20-3.30 or REDUCE slowly at the present price.

Chart: Puncak's weekly chart as at Mar 13, 2014  (Source: Tradesignum)

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, Puncak.


billyboy said...

Hi Alex, how about FRB?

Alex Lu said...

Hi billyboy,

FRB has broken above its long-term downtrend line at RM0.70. It has been moving sideways for the past few months, with support at RM0.70 & resistance at RM0.80. It has attempted to break above the RM0.80 level many times. while there were a few successes, there were no follow-thru. You may want to set a higher breakout level (say, RM0.83-0.85) before entering into a trading BUY.

Please check out the fundamentals before open a trade on this stock.

billyboy said...

Thank you.

Ivan said...

Hi Alex,

Thanks for the sharing on Puncak.