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Thursday, March 31, 2016

Parkson: A Mad Rush for Call Warrants

Parkson rallied sharply today. It made an intra-day high of RM1.11. 


Chart 1: Parkson's 30-min chart as at 31 March 2016_3.00pm (Source: ShareInvestor.com)

The rally in the share led to an even bigger rally for Parkson-CO & Parkson-CP.


Chart 3: Parkson-CO's 30-min chart as at 31 March 2016_3.00pm (Source: ShareInvestor.com)


Chart 4: Parkson-CP's 30-min chart as at 31 March 2016_3.00pm (Source: ShareInvestor.com)

Punters got carried away by the rally and chase Parkson-CO to a high of RM0.06. From the table below, you can see that Parkson-CO is out-of-the-money and is trading at a premium of 114%. Parkson-CP is trading at a more reasonable premium of 12%. Both CWs will expire on May 31- only 2 months away.


Table: Parkson's CW Listing Terms & Valuation

In view of the short period to maturity, you are advised not to take an overly bullish view of these two CWs. If you like to take a contrarian view on Parkson, the better approach is to get into the share.


Chart 2: Parkson's weekly chart as at 31 March 2016_3.00pm (Source: ShareInvestor.com)

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, Parkson.

Tuesday, March 29, 2016

BJToto: Poorer Results Buried Promising New Venture

Technical Outlook (Latest)

In early March, BJToto broke above its downtrend line at RM3.20. The breakout could be due to foreign fund buying or a belated reaction to its latest venture in Vietnam (see below). The rally peaked on March 18 (after it made a high of RM3.47) and thereafter the share price began to roll down. The catalyst for the correction was a disappointing quarterly results announced in the evening of March 18.

From the chart below, the share price has tested the downtrend line again. The downtrend line may provide some support to absorb the selling. Beyond that, BJToto needs to form a base for a possible recovery.


Chart 1: BJToto's weekly chart as at Mar 28, 2016 (Source: Tradesignum)

Latest Corporate Development
  
Berjaya Corp Bhd (BCorp) and its subsidiary Berjaya Sports Toto Bhd (BToto) have won an exclusive 18-year contract to operate a nationwide computerized lottery in Vietnam.

The project, estimated to cost US$210.58mil (RM923.65mil) would be carried out by Berjaya Gia Thinh Investment Technology Joint Stock Company (Berjaya GTI) - a company 80% owned by BCorp and 20% by BToto.

Berjaya GTI expects to launch its first game, a Lotto Jackpot game, by mid-2016, followed by a digit game thereafter. The project would initially be launched in Ho Chi Minh City and would be rolled out progressively to cover the whole of Vietnam within the next five years with some 10,000 terminals. For more, go to the Star newspaper report (here).

Results Update

For QE31/1/2016, BJToto's pre-tax profit dropped by 17% q-o-q or 44% y-o-y to RM58 million while its revenue slipped 8% q-o-q  but remained relatively unchanged y-o-y at RM1.323 billion.

Revenue dropped q-o-q mainly due to lower contribution from H.R. Owen while the decrease in pre-tax profit was mainly due to the poorer results of Sports Toto, H.R. Owen and PGMC. Sports Toto's pre-tax profit dropped 17.9% q-o-q mainly due to higher prize payout. PGMC reported lower pre-tax profit of 9.6% q-o-q mainly due to higher operating expenses incurred as well as unfavorable foreign exchange. H.R. Owen reported pre-tax loss of RM6.3 million as compared to pre-tax profit of RM1.9 million in preceding quarter due to a higher drop in revenue to RM456.1 million from RM562.3 million in the preceding quarter as a result of lower new car sales volume (due to lower supply of new model cars by certain manufacturers as well as unfavorable foreign exchange).


Table: BJToto's last 8 quarterly results

A closer look at BJToto's earnings for the past 4 years revealed a slow but steady slide. This appeared to be picking up steam in the past 3-4 quarters, with margin slipping below 6%. This poor margin couldn't be offset by higher revenue. This downtrend would probably remain in place even with the new Vietnamese venture due to large initial capital outlay.


Chart 1: BJToto's last 46 quarterly results

Valuation

BJToto (closed at RM3.13 yesterday) is now trading at a PER of 16.5 times (based on the last 4 quarters' EPS of 19.00 sen). Its dividend yield is fairly attractive at 6.1% pa. While the dividend yield is still compelling, BJToto is deemed fairly valued at the current PER.

Conclusion

Despite the bullish technical breakout and the positive Vietnamese venture, BJToto is only rated a HOLD due to its poorer financial performance and full valuation.

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, BJToto.

VS: Earnings Dropped

Result Update

For QE31/1/2016, VS's net profit was mixed - dropped by 54% q-o-q but rose 50% y-o-y to RM27.5 million - on the back of similar movement in revenue- decline of 18% q-o-q but increase of 8% y-o-y to RM501 million. VS's PBT dropped q-o-q due to lower sales contributed by the Malaysia operations and net forex losses of RM1.765 million (as compared to a net forex gain of RM14.608 million in QE31/10/2015) and allowance for slow moving inventories of RM2.905 mil.


Table: VS's last 8 quarterly results


Chart 1: VS's last 44 quarterly results

Valuation

VS (closed at RM1.26 yesterday) is trading at a trailing PE of 8.4 times (based on last 4 quarters' EPS of 14.96 sen). At this PER, VS (a cyclical stock) is deemed fairly valued.

Technical Outlook

In September last year, I cautioned that the share price could be trading at a high as VS's earning could have peaked (here). The share price continued to rise and made a high of RM1.69 in December. Since then, the share price has dropped back quite significantly. It broke the 40-week EMA line. With this breakdown, the uptrend for VS is over for this cycle.


Chart 2: VS's weekly chart as at Mar 28, 2016 (Source: ShareInvestor.com)


Chart 3: VS's monthly chart as at Mar 28, 2016 (Source: ShareInvestor.com)
 
Conclusion

Based on weaker financial performance, a potential peak in earnings and a breakdown of its uptrend, I think it is time to reduce our position in VS.

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, VS.

Monday, March 28, 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:
  • Fundamental Analysis
  • Technical Analysis
The early bird price is RM299, 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: 2 April 2016 (Saturday)
Time: 9:30am to 5:00pm
Venue: Level 16, Persoft Tower, 6B Persiaran Tropicana, 47410 Petaling Jaya, Selangor



NTPM: Earnings Grew on Stronger MYR

Result Update

For QE31/1/2016, NTPM's net profit increased by 4% q-o-q or 33% y-o-y to RM17.7 million while revenue was increased by 6% q-o-q or 13% y-o-y to RM161 million. Revenue increased q-o-q mainly due  increased sales of tissue products and baby diapers. Profit before  taxation increased q-o-q mainly due to "lower loss on foreign exchange of approximately RM0.6 million due to the weakening of MYR against major trading currencies such as US Dollars and Singapore Dollars as compared to a loss of RM2.1 million in the preceding quarter".  (Note: My understanding is that the company has been hedging its forex risk for its SGD & USD denominated export proceed. The forward contract rates had been rising; for SGD-MNYR from 2.949 to 3.064 in last 2 quarters and for USD-MYR from 3.860 to 4.000. With the strengthening MYR, the forex losses will turn into a gain; thus boosting its bottom-line. This should not be a major consideration since the gains or losses from forex are not very substantial.)


Table: NTPM's last 8 quarterly results

In QE31/10/2015, NTPM's quarterly net profit surpassed the previous highest level of RM16.6 million recorded in QE31/1/2010. Last quarter, the net profit continued to trend higher.


Chart 1: NTPM's last 42 quarterly results

Valuation

NTPM (closed at RM1.06 last Friday) is now trading  at a PE of 19.2 times (based on last 4 quarters' EPS of 5.5 sen). At this PER, NTPM is deemed fairly valued.

Technical Outlook

NTPM is in a long-term upward channel, with support at RM0.75 and resistance at RM1.20-1.30. MACD & ADX are hooking up, which are supportive of the current rally.


Chart 2: NTPM's monthly chart as at Mar 25, 2016(Source: ShareInvestor.com)

Conclusion

Based on satisfactory financial performance & positive technical outlook, NTPM's rating is maintained as a 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, NTPM.

Thursday, March 24, 2016

Cypark: Bullish Reversal?

Technical Outlook (Latest)

Yesterday, Cypark broke above the neckline of its inverted head & shoulders formation at RM1.92-1.94. This breakout was not accompanied by increased volume. To be sure, we want to see increased volume today and preferably a convincing upside breakout of the psychological RM2.00 mark. If these 2 conditions are met, then we would have a bullish reversal and the stock could potentially rally to the first target of RM2.55 in the matter of a few weeks. See Chart 1.


Chart 1: Cypark's weekly chart as at June 30, 2015 (Source: ShareInvestor.com)

Over the longer time horizon, a confirmed inverted head and shoulders reversal could be the start of the next upleg for the stock. From Chart 2, you can see that the line connecting the two past peaks would put the upper limit of the potential upleg at RM2.90-2.95.


Chart 2: Cypark's monthly chart as at June 30, 2015 (Source: ShareInvestor.com)

Background

Cypark is involved in landfill restoration, renewal energy and environmental & landscape management.


Picture: Renewal Energy Park & Landfill

Result Update

For QE31/10/2015, Cypark's net profit dropped 33% q-o-q but rose 27% y-o-y to RM8 million while revenue dropped 9% q-o-q but rose 11% y-o-y to RM56 million. Revenue dropped q-o-q mainly due to the decrease in work activities for some of the landscaping and infrastructure projects which were near to its completion in current quarter. PBT also dropped q-o-q due to lower revenue generated and recognition of unrealised foreign exchange losses in current quarter. (Note: This latest result was announced on December 31, 2015.)


 Table: Cypark's last 8 quarterly results


Chart 3: Cypark's last 22 quarterly results

Financial Position

As at 31/10/2015, Cypark's financial position is fairly tight. Current ratio stood at 0.96X while gearing ratio stood at 1.27X. After netting out cash & bank balances, gearing ratio would be lower to 0.55X. The group has large receivable which translated to an outstanding holding period of 236 days.

Cypark is continuously raising its share capital to buttress its tight financial condition (here and here). This has increased the number of shares outstanding to 248.7 million today.

Valuation

Cypark (closed at RM1.96 yesterday) is now trading at a PE of 8.9 times (based on last 4 quarters' EPS of 21.63 sen). At this multiple, Cypark is deemed fairly valued.

Conclusion

Despite the satisfactory financial performance (albeit recent drop in earning),  reasonable valuation and potentially bullish technical outlook, Cypark is a good stock for a trading BUY or a medium-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, Cypark.

Wednesday, March 23, 2016

Pohuat: Earnings dropped

Results Update

For QE31/1/2016, Pohuat's net profit dropped 11% q-o-q but rose 73% y-o-y to RM14 million while revenue increased 8% q-o-q or 44% y-o-y to RM151 million. Revenue increased q-o-q mainly due to the stronger housing sector and generally better demand for household furniture in North America.

In Vietnam, high shipment of furniture continued into November and December 2015 as the Group shipped orders which were previously delayed as a result of the fire in August 2015. This has resulted in a higher turnover of RM100.09  million in the current quarter under review. In line with the higher turnover, profit before tax of its Vietnamese subsidiary rose to RM10.49 million in the quarter under review.

Shipment of office furniture from its Malaysian operations was also higher at RM50.37 million due to the increase in shipment for project-related products to North  America.  The Malaysia  operations  however recorded a lower profit before tax due to higher payment of year-end bonus and a marginally lower average US Dollar/Ringgit exchange rate as compared the preceding quarter ended 31 October 2015.

Meanwhile, the Group results were also impacted by the weakening of US Dollar against the Ringgit during the quarter under review. This has resulted a loss in foreign currency of RM2.58 million in current quarter against a gain of RM3.80 million in the preceding quarter.

Based on the above, we can earnings from the Vietnamese operation to normalize (downward). This, plus the negative drag from the decline of USD-MYR, could easily offset the boost from the absence of higher expenses in the Malaysian operation. Thus going forward, Pohuat's earning should be lower than the last quarter.


Table 1: Pohuat's last 8 quarterly results


Chart 1: Pohuat's last 37 quarterly results

Valuation

Pohuat (closed at RM1.46 yesterday) is now trading at a PE of 6.9 times (based on last 4 quarters' EPS of 21.15 sen). At this PER, Pohuat is deemed fairly attractive.

(Note: Since my last post, Pohuat had a 1-to-2  share split and, thereafter, a bonus issue of warrant of 1-for-4 in October 2015.)

Technical Outlook

Pohuat broke its intermediate uptrend line, SS at RM1.50. This bearish breakout could lead to further decline. See Chart 2.


Chart 2: Pohuat's weekly chart as at Mar 22, 2016 (Source: ShareInvestor.com)

With the MACD dipping downward (but yet to cross below its MACD signal line) and the same goes for the ADX & ADXR, Pohuat could have peaked after its scorching rally since breaking above its long term downtrend line, RR at around RM0.15. Any pullback may find ready support at the 21-month EMA line at RM1.15-1.20. See Chart 3.


Chart 3: Pohuat's monthly chart as at Mar 22, 2016 (Source: ShareInvestor.com) 

Conclusion

Based on weaker financial performance & technical weakness, it's a good idea to take some profit on your position in Pohuat. Nevertheless, this stock is still attractively priced and you may want to revisit the stock in the next quarter or after a slight dip.

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, Pohuat.

USD-MYR: Broke The Psychological 4.00 mark

Our MYR continues to strengthen. Yesterday, USD-MYR broke he psychological 4.00 mark. This comes about 2 weeks after it broke the intermediate uptrend line, S1-S1 at 4.10. The next strong support will be at 3.75. My earlier recommendation remains unchanged: Underweight exporters. Overweight importers.


Chart: USD-MYR's daily chart as at Mar 22, 2016_3.30pm (Source: Investing.com) 

Astro: Earnings Soared

Results Update

For QE31/1/2016, Astro's net profit increased by 92% q-o-q or 46% y-o-y to RM204 million while revenue was up marginally by 2% q-o-q or 4% y-o-y to RM1.374 billion.

Revenue rose y-o-y mainly due to an increase in subscription, advertising and other revenue of RM7.8 million, RM24.8 million and RM21.0 million respectively. EBITDA  margin  increased  by  0.6%  against  corresponding  quarter  mainly  due  to  lower  staff  related  costs, and lower impairment of receivables. This was offset by higher content costs and cost of merchandise sales.

Net profit increased by RM65.1 million or 47.2% compared with the corresponding quarter. The increase in net profit is  mainly due to increase in EBITDA of RM27 million, lower net finance cost by  RM30.0 million due to lower  unrealised forex  loss  arising  from  unhedged  finance  lease  liability  of  RM19.4 million  and  unhedged  vendor  financing  of RM34.7 million,  offset  by  an  increase  in  transponder’s  lease  interest  of  RM6.8 million  and  increase  in  share  of post-tax result from investment accounted for of RM12.9 million, offset by higher tax expenses by RM11.2 million. 


Table: Astro's last 8 quarterly results


Chart 1: Astro's last 18 quarterly results

Valuation

Astro (closed at RM3.00 yesterday) is now trading at a trailing PE of 25 times (based on last 4 quarters' EPS of 11.83 sen). At this PER, Astro is full valued. If Astro can maintain its last quarter's performance for a full year, the group's EPS would rise to 16 sen while its PER would drop to 20 times. At a PER of 20 times, the stock would be attractive.

In addition, Astro paid out dividend quarterly which amounted to 12 sen for the last 4 quarters. Thus, its DY is at a decent 4%.

Technical Outlook

Astro has been drifting downward after it peaked at RM3.70 in June 2014. The price moves in a downward channel, RR-R1R1) wth support at RM2.40-2.50 & resistance at RM3.00.


Chart 2: Astro's weekly chart as at Mar 22, 2016 (Source: ShareInvestor.com)

Conclusion

Despite the improved financial performance, Astro's rating remains a HOLD due to its expensive valuation and bearish technical outlook.

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, Astro.

Tuesday, March 22, 2016

Genting: Time To Take Some Profit

When I highlighted about the positive technical signs in Genting, I did not expect the share price to power-up in the manner it did over the past 4 weeks. Genting rose from RM8.17 to RM9.50 yesterday while its warrant (Genting-WA) rose from RM1.09 to RM2.07 in the same period.

From Chart 1 below, we can see that Genting is still in a downward channel (ABCD), with resistance at RM9.70. Genting-WA, which broke above its horizontal resistance at RM2.00 yesterday, may encounter its downtrend line, SS at RM2.25 soon.


Chart 1: Genting's monthly chart as at Mar 22, 2016_9.05am  (Source: ShareInvestor)


Chart 2: Genting-WA's weekly chart as at Mar 22, 2016_9.05am  (Source: ShareInvestor)

Given the sharp rally in the stock & its warrant, I believe it is a good time to take some profit. The good level to do so would be near the downtrend line for Genting at RM9.60-9.70 and for Genting-WA at RM2.15-2.25.

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, Genting & Genting-WA.

Monday, March 21, 2016

Magni: Earnings continued to grow

Results Update

For QE31/1/2016, Magni's net profit rose 20% q-o-q or 49% y-o-y to RM26 million while revenue rose 36% q-o-q or 34% y-o-y to RM269 million. Revenue for the current quarter increased q-o-q mainly due to higher revenue for the garment & packaging segments, increase of 42.2% and 3.2% respectively mainly due to higher sales orders received. PBT increased by 19% q-o-q mainly due to higher revenue but was aprtially offset by lower other operating income (due to lower currency exchange gain).


Table: Magni's last 8 quarterly results


Chart 1: Magni's last 28 quarterly results

Valuation

Magni (trading at RM4.48 last Friday) has a trailing PE of 9.1 times (based on last 4 quarters' EPS of 49.04 sen). At this PER, Magni's valuation is still attractive. 

Technical Outlook

Magni is in a strong uptrend. Indicators are generally positive.


Chart 2: Magni's monthly chart as at Mar 18, 2016 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance, attractive valuation & positive technical outlook, Magni 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, Magni.

HSL: Bullish Breakout


Last week, HSL announced that it has secured 2 contracts with value totaling RM2.46 billion, via two separate consortia. The contract details are:

1) The consortium of Kumpulan Nishimatsu Hock Seng Lee has been awarded a contract by the State Government of Sarawak through Jabatan Perkhidmatan Pembetungan Sarawak, worth Ringgit Malaysia Seven Hundred Fifty Million Only (RM750,000,000.00) for the Kuching City Central Wastewater Management System: Centralized Sewerage For Kuching City Centre (Package 2) (“the Project”). Hock Seng Lee Berhad has 75% equity in the Consortium. For more, go here.
2) The consortium of Hock Seng Lee Berhad – Dhaya Maju Infrastructure (Asia) Sdn. Bhd. Joint Venture, an unincorporated joint venture between Hock Seng Lee Berhad and Dhaya Maju Infrastructure (Asia) Sdn. Bhd., has been awarded a Contract by Lebuhraya Borneo Utara Sdn Bhd for the DEVELOPMENT AND UPGRADING OF THE PROPOSED PAN BORNEO HIGHWAY IN THE STATE OF SARAWAK, MALAYSIA - PHASE 1: BINTANGOR JUNCTION TO JULAU JUNCTION AND SIBU AIRPORT TO SG. KUA BRDIGE (INCLUDING BATANG RAJANG BRIDGE).  The Project is worth Ringgit Malaysia One Thousand and Seven Hundred and Ten Million, Four Hundred and Thirty One Thousand, Seven Hundred and Eighteen and Sen Ninety Only (RM1,710,431,718.90) and Hock Seng Lee Berhad has 70% equity in the Consortium. For more, go here.

The stock broke above its RM2.00-2.05 resistance last week. With the breakout, the share price may rise to the first target of RM2.35. On the longer term, the share price may continue its uptrend to RM3.00. Its all-time high was RM4.00 in 1997. The later target may not be too far-fetched in view of its position as one of the top construction companies in Sarawak and the amount of work that may be awarded via the Pan Borneo Highway project.


Chart 1: HSL's weekly chart as at Mar 18, 2016 (Source: ShareInvetor.com)


Chart 2: HSL's monthly chart as at Mar 18, 2016 (Source: ShareInvetor.com)

Based on bullish breakout, HSL 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, BAT & HSL.

Friday, March 18, 2016

BAT Shutting Down Its PJ Plant (Updated)

BAT has announced that it will shut down its plant located in Petaling Jaya. This will lead to the retrenchment of 230 workers (here).


 via The Edge Financial Daily

The immediate impact will be mixed. The stock is trading near its long-term uptrend line support at RM53.00. I expect the uptrend line to hold. 


Chart 1: BAT's monthly chart as at Mar 17, 2016 (Source: ShareInvestor.com)

I expect the long-term benefit of the closure to the company will be positive. A good example is to look at is Panamy (then known as Matsushita)'s closure of its Bangi appliance plant in 2005. The share price has risen from around RM7.00 to above RM27.00 today. [In 2013, Panamy also closed its LCD plant in Shah Alam.]

 
Chart 2: Panamy's monthly chart as at Mar 17, 2016 (Source: ShareInvestor.com)  

I included here the upward trend in the financial performance of Panamy since the closure of its Bangi Plant in 2005.


Chart 4: Panamy's financial performance from QE31/3/2005 to QE31/12/2015

Based on the Panamy positive experience, I would recommend a HOLD on BAT. If the share price were to drop to RM52-53, it would be a long-term 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, BAT & Panamy.

Thursday, March 17, 2016

USD-MYR: Struggling To Hold Onto Its Uptrend Line

 USD had a very volatile trading session yesterday. According to FXSTEET, the USD came under selling pressure "after Fed “Dot Chart” revealed the policymakers now expect only 2 rates hikes by the year end as opposed to expectation of four rate hikes in December. Furthermore, the Fed also revised 2016 GDP forecasts lower". USD index dropped sharply to 95.93 (see Chart 1 below).


Chart 1: USD Index's daily chart as at Mar 16, 2016 (Source: Stockchart.com)

As a result, USD-MYR broke below 4.10 overnight. Again we are facing the prospect of a continuing decline in USD-MYR or plain English, strengthening of MYR.


Chart 2: USD-MYR's daily chart as at Mar 17, 2016_8.45am (Source: Investing.com)  
 
I have appended below the charts of USD Index next to USD-MYR. We can see the following:
  • USD-MYR tracked USD Index closely up to May 2015
  • From May 2015 to September 2015, MYR weakened while USD was moving sideways; resulted in a rising USD-MYR
  • In October-November 2015, USD-MYR failed to make a new high despite sharp rise in USD Index
  • From then on, USD-MYR again tracks USD Index fairly closely
From this simple analysis, I believe that MYR made a bottom in late September to early October. At that point of time, the USD-MYR was trading at 4.45-4.50.


Chart 3: USD Index & USD-MYR's daily chart as at Mar 17, 2016 (Source: Stockchart.com & Investing.com)  

In conclusion, I believe that we should underweight stocks that had benefited from a weaker MYR (or stronger USD-MYR) such as exporters. Instead we should overweight stocks that would benefit from a stronger MYR (or a weaker USD-MYR).

Topglov: Earnings Dropped Sequentially on Strengthened MYR

Results Update

For QE29/2/2016, Topglov's net profit dropped 18.5% q-o-q but rose 86.6% y-o-y to RM105 million on the back of a revenue which had similarly dropped 13.3% q-o-q but rose 21.2% y-o-y to RM693 million. PBT dropped q-o-q due to the weakening USD, as well as intense competition in the nitrile glove segment as well as the increase in natural gas price. [Like Kesm's recent result, Topglov's financial performance is extremely sensitive to forex movement. Going forward, we can expect current quarter result of other exporters will be lower if MYR continue to strengthen.]

 
Table: Topglov's last 8 quarterly results


Chart 1: Topglov's last 39 quarterly results

Valuation

Topglov (traded at RM5.20 yesterday) is now trading at a PE of 15.8 times (based on last 4 quarters' EPS of 32.87 sen). At this PE multiple, Topglov is fairly valued. [Topglov had implemented a 1-for-1 bonus issue in January.]

Technical Outlook

Topglov broke its intermediate uptrend line, S1-S1 at RM5.50 in late January. Since then it had been struggling to stay above the RM5.00 mark. Its trading range was quite wide- as high as RM5.89 and as low as RM4.79. Failure to stay above the RM5.00 psychological mark could see the stock dropping to the horizontal line at RM4.30 or even the long-term uptrend line at RM3.80.  



Chart 2: Topglov's weekly chart as at Mar 16, 2016 (Source: ShareInvestor.com)


Chart 3: Topglov's monthly chart as at as at Mar 16, 2016 (Source: ShareInvestor.com)

Conclusion

Despite a drop in earning and a mildly negative technical outlook, Topglov is still a good stock for long-term investment based on fairly attractive valuation and good industrial outlook. The rating is revised from BUY to 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, Topglov.

Wednesday, March 16, 2016

Media: Bottoming Out?

Background

Media Prima Bhd ('Media') is the largest integrated media investment group in Malaysia. Its main businesses are:

1) Television Networks, consisting of Sistem Televisyen Malaysia Berhad (“TV3”), Metropolitan TV Sdn Bhd (“8TV”), Natseven TV Sdn Bhd (“ntv7”) and Ch-9 Media Sdn Bhd (“TV9”);
2) Print Division which is one of Malaysia’s largest publishing groups owning leading newspaper titles such as the New Straits Times, Berita Harian and Harian Metro;
3) Radio Networks comprising Synchrosound Studio Sdn Bhd (“Hotfm”) and Max-Airplay Sdn Bhd (“Flyfm”); and
4) Out-of-Home Division comprising Big Tree Outdoor Sdn Bhd (“BTO”), UPD and The Right Channel Sdn Bhd (“TRC”).



Financial Performance

A. Last 10 Quarters
Media's last 10 quarters financial performance shows dipping revenue and profits. To lower overhead cost, the group reduced its head counts in QE31/12/2014 through a Mutual Separation Scheme  (MSS). The MSS expenses amounted to RM79.8  million and pushed the group into the red for that quarter. This one-off expenditure may be helping the group to keep the net profit margin above the 10%-mark (except for QE31/12/2015 which was due to lower revenue).


Table: Media's last 10 quarterly P&L


Chart 1: Media's last 10 quarterly P&L

B. FY2015
 
Group performance for the current financial year had been generally affected by the soft advertising spending and subdued market sentiment. The challenging environment was reflected in the Group’s revenue which reduced by 5% against the preceding financial year.

However, profitability increased significantly as a one-off Mutual Separation Scheme (“MSS”) cost of RM79.8 million was incurred in the preceding financial year.  If the MSS cost is excluded from 2014’s results, current year’s PAT declined by 2% against the preceding year.

C. Last 10 Years

Media's revenue & earnings jumped in FY2010 after it acquired NST. After that, profits began to erode as profit margin slipped. Going forward, we will see how the cost-cutting effort succeeds after the massive MSS in 2014.


Chart 1: Media's last 10 qannual P&L

Financial Position

Media's financial position is deemed satisfactory as at 31/12/2015. Its current ratio stood at 2.7X while total liabilities to total equity was at 0.4X. The cash in hand is RM420 million or net of RM120 million (after deducting borrowing 5-year MTN 2012/2017 totaling RM300 million, with a coupon rate of 4.38%, maturing on 28 December 2017).

Valuation

Media (closed at RM1.41 yesterday) is now trading at a trailing PE of 12X (based on last 4 quarters' EPS of 12.5 sen) or at a P/book of 1X (based on NTA of RM1.46 per share). Its DY is at a decent 7%.

Substantial Shareholder selling

A close look at Changes in Shareholding reveals that EPF is persistently selling its stake in Media. As Jan 6, 2015, EPF still held 13.945% of Media's shares.

Technical Outlook

Media has broken above its long-term downtrend line, RR at RM1.35 in October last year. At the moment, the stock is recruiting buying support to absorb the persistent selling by EPF (see noted above). An upside breakout above RM1.45-1.50 would signal the start of its upleg.


Chart 2: Media's weekly chart as at Mar 15, 2016 (source: ShareInvestor.com)

The monthly chart below shows MACD crossing above the MACD signal line. Slow Stochastic has climbed up. -DMI is dropping along with +DMI climbing up. These indicators are showing a bottom in the share price of Media.


Chart 3: Media's monthly chart as at Mar 15, 2016 (source: ShareInvestor.com)

(Note: This stock traveled one full circle after I first posted on it in September 2008. It was traded as RM1.47 on Sep 2, 2008. My comment on the stock's technical outlook was "Media's share price has sliding since making a high of RM3.20 in June 2007. Its strong horizontal support is at RM1.40.")

Conclusion

Based on mild positive technical outlook and satisfactory financial position, Media could be a good long-term investment. However, it must be noted that a string recovery will only happen when financial performance improved significantly.

 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, Media.