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Friday, January 29, 2016

Telcos hit by hefty bill to retain their spectrum

As reported in the Star newspaper, the government has announced that it will optimise the revenue from telecommunication spectrum through a redistribution and bidding process that will be implemented soon. This was announced under the revised Budget 2016.

According to a CIMB report, if "the MCMC uses the same reserve price benchmark (as per the recent Thai auctions), the minimum Maxis, Celcom and DiGi would have to pay to retain their 900MHz and 1800MHz spectrum are RM2.37bn, RM2.43bn and RM1.46bn, respectively. This would shave off 4.7% of our target price for Maxis, 4.2% for Axiata and 3.8% for DiGi."

The reaction from the market was swift. All three stocks dropped substantially this morning. Both Maxis and Axiata broke their strong horizontal support at RM6.20 & RM5.60 respectively. Digi dropped less and may find support at its horizontal line at RM4.60. As the current prices are still above the revised fair prices for all three counters (as per CIMB's report), it is best to avoid these stocks for now.

Chart 1; Axiata's monthly chart as at Jan 29, 2016_10.45am (Source: ShareInvestor)


Chart 2: Maxis's monthly chart as at Jan 29, 2016_10.45am (Source: ShareInvestor)


Chart 3: Digi's monthly chart as at Jan 29, 2016_10.45am (Source: ShareInvestor)

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, Axiata, Digi & Axiata.

MYR Recovery Begins?

In November last year, I posted about a tentative MYR recovery. Those in the market long enough will learn -as I did - that markets have a perverse way of proving us wrong at every opportunity. That call was no exception.

USD-MYR & SGD-MYR actually went up after the November call. However today our MYR strengthens against both these currencies- set the stage for a possible bearish reversal. See the two charts below.

 
Chart1: USD-MYR's weekly chart as at Jan 29, 2016_10.45am (Source: Investing.com)


Chart 2: SGD-MYR's weekly chart as at Jan 29, 2016_10.45am (Source: Investing.com)

In my earlier post, I have recommended that investors should take profit on those trades that were based on a weakened MYR. If you have done so, you would be a happier man. See the sharp drop for rubber glove producers below.


Chart 3: Harta's weekly chart as at Jan 29, 2016_10.45am (Source: ShareInvestor)


Chart 4: Topglov's weekly chart as at Jan 29, 2016_10.45am (Source: ShareInvestor)


Chart 5: Kossan's weekly chart as at Jan 29, 2016_10.45am (Source: ShareInvestor)

On the other hand, you would have made a decent profit if you had positioned in the opposite side - based on a strengthening MYR - by buying into stocks which were weighed down by USD borrowings (example: Tenaga) or importers (examples: automakers).

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, Harta, Topglov, Kossan & Tenaga.

Spritzr: Earnings rose marginally q-o-q

Result Update

For QE30/11/2015, Spritzr's net profit increased marginally by 1.5% q-o-q & 114% y-o-y to RM7.4 million. Revenue was mixed- dropped 1.6% q-o-q but rose 13% y-o-y to RM66 million. Revenue increased y-o-y due to increased sales volume of bottled water products & packaging material as well as better selling prices. This plus reduction in the cost of packaging material costs led to a y-o-y jump in profits.


Table: Spritzr's last 8 quarterly results


Chart 1: Spritzr's last 38 quarterly results

Valuation

Spritzr (closed at RM2.33 yesterday) is now trading at a PE of 12 times (based on last 4 quarters' EPS of 19.38 sen). At this PER, Spritzr is still deemed attractive for a consumer stock.

Technical Outlook

Spritzr is in a long-term uptrend line, with support at RM2.00. Its immediate resistance at the horizontal line at RM2.40.


Chart 2: Spritzr's monthly chart as at Jan 28, 2015-6  (Source: ShareInvestor.com)

The medium-term chart shows immediate support at RM2.15.


Chart 3: Spritzr's daily chart as at Jan 28, 2015-6  (Source: ShareInvestor.com)

Conclusion

Based on satisfactory financial performance, attractive valuation and mildly positive technical outlook, Spritzr 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, Spritzr.

MPI: Earnings dropped sequentially

 Result Update

For QE31/12/2015, MPI's net profit dropped 30% q-o-q but rose 37% y-o-y to RM43 million. Profits dropped q-o-q due to lower revenue & forex differences. Revenue dropped q-o-q from RM387 million to RM380 million due to 1%-increase in revenue for USA but decline for Europe and Asia of 1% & 4% respectively.


Table: MPI's last 8 quarterly results


Chart 1: MPI's last 36 quarterly results 

Industrial Outlook

Semiconductor may have peaked in this cycle. This may explain the pullback in MPI's latest quarterly revenue- despite the weakening of MYR vis-a-vis USD.


Chart 2: SOX's weekly chart as at Jan 28 2016 (Source: Stockcharts.com)

Valuation

MPI (closed at RM8.66 yesterday) is now trading at a trailing PER of 11.4 times (based on last 4 quarters' EPS of 76 sen). At this PE multiple, MPI is deemed fairly attractive.

Technical Outlook

MPI failed to surpass its strong horizontal resistance at RM10.00. This led to a sharp correction over the past 4 weeks.

 
Chart 3: MPI's monthly chart as at Jan 28 2016 (Source: ShareInvestor.com)

On weakness, MPI may find support at the horizontal line at RM7.25 or the uptrend line at RM7.00.
 
   
Chart 4: MPI's weekly chart as at Nov 17, 2015 (Source: ShareInvestor.com)

Conclusion

Despite the sharp correction in the past 4 weeks, MPI's long-term technical outlook remains positive. Thus it still deserves to be rated a HOLD. However, its upside may be limited as its valuation is no longer cheap. In addition, the concern going forward is whether the pullback in SOX will signal the end of the current up-cycle for semiconductor. If so, we may see further weak earnings ahead.

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, MPI.

Thursday, January 28, 2016

Takaful: Earnings improved on higher fee income

Results Update

For QE31/12/2015, Takaful's net profit increased by 6% q-o-q or 22% y-o-y to RM36 million while revenue rose marginally by 4% q-o-q or 0.5% y-o-y to RM403 million. Revenue increased marginally y-o-y mainly attributable to higher sales generated by Family Takaful business. Its profit before zakat and taxation increased y-o-y mainly attributable to higher wakalah fee income.


Table: Takaful's last 8 quarters' results

From the Chart 1 below, we can see that the revenue is on the uptrend. Profit margin rose steadily over the past 4 quarters. The increased profit margin helped to stabilized the profit numbers despite lower revenue over the past 3 quarters.


Chart 1: Takaful's last 39 quarters' results

Valuation

Takaful closed at RM3.76 yesterday. This means that Takaful is now trading at a PE of 19.6 times (based on the last 4 quarters' EPS of 19.2 sen). At this PE multiple, Takaful is deemed fully valued.

Technical Outlook

The stock has been in an uptrend in the past 4 years. However its movement was sideways for the past 6-7 months after the share split of 1-to-5. Considering 500%-increase in the outstanding shares, Takaful's share price movement has been fairly encouraging.


Chart 2: Takaful's monthly chart as at Jan 27, 2016 (Source: ShareInvestor)

Conclusion

Based on satisfactory financial performance & positive technical outlook, Takaful is still a good stock for long-term investment. However, its upside potential is limited as the stock is fully-valued.

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, Takaful.

Wednesday, January 27, 2016

Market Outlook as at January 27, 2016

FBMKLCI tried to stage a rebound today. The rebound had little momentum and by the afternoon session, we saw losers outnumbered gainers. The market is likely to continue its downtrend as reflected by the fast 10-week SMA line crossing below the slower 21-week SMA line. In addition, MACD may have crossed below the MACD Signal line which would signal continuation of the downtrend.


Chart 1: FBMKLCI's weekly chart as at Jan 27, 2016 (Source: ShareInvestor)

Our market was pinning its hope of a decent recovery based on better showing on Wall Street overnight. From the chart below, we can see that DJIA may have found only a temporary bottom at best. From here, it might swing up to test the horizontal resistance at 16500 or 17000. The 4-year uptrend line that stretched back to September 2011 was convincingly broken in August last year. That was proceeded by a likely rounding top that stretched from October 2014 to August 2015.


Chart 2: DJIA's weekly chart as at Jan 26, 2016 (Source: Stockcharts.com)  

Based on poor technical outlook, we must remain cautious in this market.

Tuesday, January 19, 2016

GAB: Special Dividend of 30 sen

 Result Update

For QE31/12/2015, GAB's net profit increased by 44% q-o-q or 19% y-o-y to RM91 million while revenue increased 30% q-o-q or a meager 1% y-o-y to RM525 million. Group revenue and PBT  increased by 30% and 40% respectively against the immediate preceding quarter mainly due  to cyclical demand for CNY sell-in.


Table: GAB's last 8 quarterly results

What's encouraging is that the group's quarterly profit has surpassed the RM100 million-mark - an all-time high for the past 10 years! The improved profits was due to better profit margins!


 
Chart 1: GAB's last 40 quarterly results

Valuation

GAB (at RM13.08 today) is trading at a PE of 16.6 times (based on last 4 quarters' EPS of 78.59 sen). At this multiple, GAB is deemed fairly valued. In addition, GAB has a respectable dividend yield of 6.2%  (excluding the special dividend of 30 sen).

Technical Outlook

GAB peaked in May 2013 courtesy of the mad chase for yield in a world flushed with liquidity. This was noted in my post entitled GAB: Price to Perfection. Since then, the stock had corrected and it broke its uptrend line in January 2014.


Chart 2: GAB's monthly chart as at Jan 19, 2016 (Source: ShareInvestor)

In the past 1 year, GAB has been consolidating in a "ascending triangle" ["ABCD"] with support & resistance at RM12.80 & RM14.70, respectively. Since GAB is trading near the lower line ('BD"), I think the stock could enjoy a rebound & swing up to the upper line (giving an upside of RM2.00).

An upside breakout above the "ascending triangle" at RM14.70 could signal a reversal of the 2&1/2 year downtrend. On the other, if the stock breaks below RM12.80, it could signal the continuation of that downtrend. For now, I would rate a breakout on either direction to be unlikely. The more likely scenario is for the stock will remain range-bound between RM12.80 & RM14.70.


Chart 3: GAB's weekly chart as at Jan 19, 2016 (Source: ShareInvestor)

Conclusion

Based on improving financial performance, good dividend & fairly valuation, GAB is rated as a HOLD. GAB is not a bad idea for a trading BUY as it trades near a decent support at RM12.80 which could be a set-up for a possible upswing of RM2.00 to the resistance of RM14.70.

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, GAB.

Sunday, January 17, 2016

US Markets: Bearish Reversal

DJIA broke its uptrend line, SS support at 17500 in August last year. Despite a spirited rebound in October, the index failed to reclaim its uptrend line. Last week, DJIA plunged to the lows of August & September 2015. Having cracked below the "horizontal" line, AB at 16000 last Friday, DJIA must stage a convincing recovery next week. Failure to do so could see the index to retest its August intra-day low of 15400. Beyond this level, the bear market begins.


Chart 1: DJIA's weekly chart as at Jan 15, 2016 (Source: Stockcharts.com)

With slight variation, the same pattern appears in all the other major indices. Next week will be a critical week for the US markets - and the rest of the world markets.

 
Chart 2: S&P500's weekly chart as at Jan 15, 2016 (Source: Stockcharts.com)


Chart 3: Nasdaq's weekly chart as at Jan 15, 2016 (Source: Stockcharts.com)


Chart 4: Russell 2000's weekly chart as at Jan 15, 2016 (Source: Stockcharts.com)

Despite having a stronger technical outlook at the start of the year, our market had also succumbed to selling pressure. If FBMKLCI were to break below 1630, I believe we could revisit the August low of 1500 again.


Chart 5: FBMKLCI's daily chart as at Jan 15, 2016 (Source: ShareInvestor.com)

Thursday, January 14, 2016

A half-day seminar on investing in the stock market

I will be conducting a half-day seminar entitled "Introduction to Investing in the Stock Market" jointly with ShareInvestor. The seminar will cover these 3 topics:
  • Investment Philosophy & Strategies
  • Fundamental Analysis
  • Technical Analysis
The early bird price is RM299 - which will end today - includes a 6-month access to ShareInvestor Webpro (worth RM200). The readers of nexttrade can still get the early bird price if you use the promo code "sp299". You can register using this link.

Date: 23 January 2016 (Saturday)
Time: 9:00am to 4:30pm
Venue: Bursa Malaysia, Training Room 3, Ground Floor, Annexe Building, Exchange Square, Bukit Kewangan, 50200 Kuala Lumpur




Tuesday, January 12, 2016

PetronM: Time to take profit

PetronM has rallied like a rocket in the past 3 weeks. It has just tested the upper line of its irregular upward channel (RR) at RM7.00-7.30. While it is possible that it may even revisit its 1996 high of RM7.50, the odd of that happening is not worth the wager.

The sharp rise in PetronM is due to the exceptional circumstance of low cost of input material (i.e. crude oil) and the regulated higher price of refined products. This exceptional sweet spot occurs once in a long while. Make the best of it but don't overstay. When the situation reverses, refiners' margin will be back to normal (or even goes negative). Then the current high share price will be like a distant dream.

It's good time to take profit.


Chart: PetronM's monthly chart as at Jan 12 2016_9.30am (Source: ShareInvestor,com)

Conclusion

Based on tentative turnaround  & technical support sighted at present price, PetronM could be a good stock for a recovery play.

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, PetronM.

Friday, January 08, 2016

Engtex: Letting the warrant steal the show

Engtex-wa broke above its downtrend line this week at RM0.48 and rallied to a high of RM0.56 today. Its mother share, Engtex has also broken above its downtrend line at RM1.28. However, Engtex seems rather subdue.

In this situation, you can expect to see wither Engtex catching up with the warrant or the warrant correcting back. Given the current volatility in the market, it is a surprise to find the warrant marching higher. The buying of this riskier instrument is likely the work of insiders. It could be a prelude to an interesting development. Nonetheless, we must note that the warrant is trading at a small premium (only 5% currently as compare to only  2% last week).

With the bullish breakout of the downtrend and only a minimal price run-up, Engtex is a relatively safe trading BUY if you take the view that the dichotomy noted above will be resolved in favor of the mother share. Again, I wish to point out that you should exercise careful discretion in all trading given the current market volatility. Good luck!


Chart: Engtex-WA & Ebgtex's weekly chart as at Jan 7, 2016_9.00pm (Source: ShareInvestor) 

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, Engtex-wa & Engtex.

Muhibah: Riding on Favco's Coattail

Over the past 2 weeks, Favco has risen to a high of RM3.20 after it broke above its downtrend line at RM2.65-2.70. Muhibah, which owns 60% of Favco, has broken above its downtrend line at RM2.20 about 6 weeks earlier. After an initial rally to RM2.40, Muhibah has rolled back to the breakout level of RM2.20 & remained there. This week - probably prompted by the rally in Favco - Muhibah is once again on the move.

Based on technical breakout, Muhibah could be a trading BUY. Please exercise careful discretion in your trading given the present volatility in the market. Good luck!


Chart: Muhibah & Favco's weekly chart as at Jan 7, 2016_3.00pm (Source: ShareInvestor) 

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, Muhibah & Favco.

Thursday, January 07, 2016

Market Outlook as at January 7, 2016

Despite the sharp volatility in the past few days, our market looks better than many stock markets around the globe. Our FBMKLCI broke above its flag formation, ABCD at 1665 on December 28. It then continued to rise to an intraday high of 1706 on December 30 (courtesy of window-dressing activities). The first day saw a sharp plunge in our market which sent FBMKLCI to the upper line of the flag formation. Here it remained for the past 2 days.


Chart 1: FBMKLCI's daily chart as at Jan 6, 2016 (Source: ShareInvestor.com)
 
US stock markets dropped sharply yesterday. We can see both DJIA & Nasdaq have broken below their pennant or flag formation.The last time, these indices broke these patterns, the market plunged sharply over the next few days. Their drop coincided with the drop in our market.

 
Chart 2: DJIA's daily chart as at Jan 6, 2016 (Source: Shtockcharts)


Chart 3: Nasdaq's daily chart as at Jan 6, 2016 (Source: Shtockcharts)
 
Notwithstanding our mildly positive technical outlook, I believe we should all be cautious in our trading over the next few weeks based on possible impact of bearish development in the US stock markets.

Chinwel: Are we too late for the party?

Background

Chin Well Holdings Bhd ('Chinwel') is involved in the production of screws, bolts, nuts, studs & washers. It was founded in 1989 while its Vietnam operation was started in 2005. Its main markets are Europe (60%), US (30%), Japan (5%) and South East Asia (5%).

Recent Financial Performance

Chinwel's quarterly revenue had been hovering around the RM120-130 million mark for the past 7 quarters. Last quarter, it managed to surge to RM140 million. Net profit surpassed the high recorded in Jun2015 & Jun2014 of RM12.5 million when it touched a high of RM18.2 million. Revenue increased due to stronger demand from local market & trading sales while bottom-line was boosted by forex gain.


Chart 1: Chinwel's last 10 quarterly results (Source: ShareInvestor)

Historical Performance

The last 10 years of financial performance shows that the group's revenue has been flattish in the past 5 years while bottom-line has been rather erratic. If MYR remains weak for the next few quarters, Chinwel's bottom-line may continue to rise.


Chart 2: Chinwel's last 10 yearly results (Source: ShareInvestor)

Financial Position

Chinwel's financial position as at 30/9/2015 is deemed healthy, with current ratio at 3.8X & gearing ratio at 0.3X. However, its inventory holding period is very high at 174 days. While the high inventory level is a matter of concern, we can take comfort that they are not likely to go obsolete.

Valuation

Chinwel (closed at RM2.31 yesterday) is now trading at a PE of 13.6X (based on last 4 quarters' EPS of 17 sen). Based on this PER, Chinwel is deemed fully valued.

Technical Outlook

Chinwel broke above its strong horizontal resistance at RM1.75 in early November 2015. What is more interesting is that the stock has broken above its 15-year triangle formation at the same time. While this call comes rather late - almost 2 months old after the breakout & 55-sen above the breakout point - the breakout of a 15-year formation may still have more upside. With the immediate target at RM2.60-2.80, I think there is still prospect for a decent gain in the near term for the stock.


Chart 3: Chinwel's weekly chart as at Jan 6, 2016 (Source: ShareInvestor)


Chart 4: Chinwel's monthly chart as at Jan 6, 2016 (Source: ShareInvestor) 

Conclusion

Based on bullish technical breakout, Chinwel could still be a good stock for a trading BUY. Its fair valuation & satisfactory financial performance could be supportive of the ongoing rally or at the very least cushion any down force when correction kicks in.

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, Chinwel.

Monday, January 04, 2016

JTiasa: Possible breakout

JTiasa has broken above its intermediate downtrend line, RR at RM1.33 three weeks ago. It attempted to rally - without success - as it was unable to overcome the horizontal line at RM1.37-1.39. Today, it managed to charge above this resistance. As at 12.15pm, it was trading at RM1.41.

If JTiasa can stay above the RM1.40 mark, its next upleg could begin. Its next resistance at RM1.75 could be the target if the stock breaks into a rally.


Chart 1: JTiasa's weekly chart as at Dec 31, 2015 (Source: Interachart.com.com)

Another Sarawakian timber-cum-plantation company which had done very well in the past 3 months is Ta Ann. From the chart below, we can see that it broke above its intermediate downtrend line, RR at RM3.70 in mid-October last year and rallied to test and eventually break above the horizontal line at RM4.50. Ta Ann could potentially hit the 1-for-1 target of RM5.60.


Chart 2: TaAnn's weekly chart as at Dec 31, 2015 (Source: Interachart.com.com) 

 Based on the above, I believe that JTiasa could be a good trading BUY.

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, JTiasa.