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Tuesday, November 21, 2017

Presbhd: SKINned in the Sell-down

Background

One of the many stocks that have dropped sharply in the current sell-down is Presbhd. You may recall, Presbhd - thru its 70%-owned subsidiary, Prestariang Services Sdn Bhd ('PServices') - has secured the contract to upgrade our immigration system in July this year. The cost of developing the system, known as SKIN, is about RM1 billion and the work will take about 3 years. Upon completion, PServices is entitled to collect RM294.7 million a year for the next 12 years.

At this moment, there is no news whether PServices has achieved the financial close for SKIN. In an October report, AmInvestment Bank has gathered that "the group is in discussion with several financial investors, and is in the midst of securing the best offer(s)". AmInvestment Bank is prepared to raise the fair value for Presbhd from RM2.08 to cica RM3.00 once the financial close for SKIN is attained. In September, Public Investment Bank has assigned a 12-month target for Presbhd of RM2.87.

We should not be too surprised by the sell-down for Presbhd as there were signs earlier that one or more of the substantial shareholders had been selling (as pointed out in my earlier report). Having said that, I am quite perplexed as to why the selling is so aggressive at this low price level. Chartwise, Presbhd is now struggling to hold at its long-term uptrend line support of RM1.20-1.25. If this support failed, it can easily drop to the psychological RM1.00 mark.


Chart: Presbhd's weekly chart as at Nov 21, 2017 (Source: Malaysiastock.biz)

Recent Financial Performance

As you can see, Presbhd' financial performance is fairly decent.


 Table: Presbhd's 8 quarters' P&L


 Graph: Presbhd's 19 quarters' P&L

Latest Financial Position

As at 30/6/2017, Presbhd's financial position is deemed satisfactory with current ratio at 3.7x and gearing ratio at 0.3x.

Conclusion

Based on satisfactory financial performance & position, and fairly attractive valuation, Presbhd is considered a good stock for long-term investment. The main concern is the weak technical outlook which may lead to further price weakness in the near term. In view of this, you should exercise careful discretion if you wish to add this stock to your portfolio.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Wednesday, November 15, 2017

Market Outlook as at November 14, 2017

Our market has been sliding in the past 3 days. FBMKLCI lost a total of 13.20 points during the 3-day period, with significantly higher losers than gainers. This is borne out by the intra-day chart below.


Chart 1: FBMKLCI's intra-day chart as at Nov 14, 2017 (Source: Shareinvestor.com)

From the daily chart, we can see that FBMKLCI is once again at the low recorded in October 25-26 of 1733. If FBMKLCI were to go below 1733, the downtrend of the index will continue.


Chart 2: FBMKLCI's daily chart as at Nov 14, 2017 (Source: Malaysiastock.biz)

Looking at the weekly chart, we can see that the 10-week SMA line has cut below the 20-week EMA line and is poised to also cut below the 30-week EMA line. This is marked as "X" on the chart. At the same time, we can see the MACD is almost about to go below the zero line.

The current price action is similar to what we saw in the last quarter of 2014 - marked as "X1" - when the 10-week SMA line cut below the 20-week EMA line and then cut below the 30-week EMA line. What followed was a sharp sell-off where we saw a 120-point drop in the index from 1840 to 1720.

I have given the above price action as a possible sell-off scenario if FBMKLCI were to break below 1733. Any sell-off that may happen, might not be as sharp as what we saw in late 2014 because the earlier sell-off came after a long rally that started in 2009. The current developing price action - if it turned out negatively - is a retracement of a 6-month rally from January 2017 to June 2017. Nevertheless, we have to be careful, especially in our trading activities in the near term, because we have seen daily how volatile the market can be. As always, good luck to everyone out there!


Chart 3: FBMKLCI's weeky chart as at Nov 14, 2017 (Source: Malaysiastock.biz)

Tuesday, November 14, 2017

Construction Stocks Took A Knock

Last Tuesday, Gamuda took a sharp knock on news that it will not play the role of Project Delivery Partner ('PDP') for MRT3 because the Government has opted for the 'build and finance' model by a turnkey contractor to undertake that project. This decision was taken to remove the Government's funding burden as earlier phases. MRT1 & MRT2 were financed by the Government via Danainfra bonds.

The market has now come to apply this decision to other big-ticket projects, such as the High Speed Rail Link ('HSRL') between KL & Singapore as well as the East Coast Rail Link ('ECRL'). This would effectively preclude our big construction companies from these projects and it would hit their order books as well as bottom-line going forward.

This may explain why the share prices of large construction companies took a tumble over the past few days or weeks. Let's look at them individually: 

1) Gamuda is at its intermediate uptrend line, S1-S1 support at RM4.80. If this support breaks, it may drop to the long-term uptrend line, SS at RM4.00.


Chart 1: Gamuda's monthly chart as at Nov 13. 2017(Source: Malaysiastock.biz)

2) IJM has broken below its intermediate uptrend line, S1-S1 support at RM3.30. It is now at the long-term uptrend line, SS support of RM3.00. If this fails, IJM may slide to RM2.00-2.20 horizontal support.


Chart 2: IJM's monthly chart as at Nov 13. 2017(Source: Malaysiastock.biz)

3) YTL has broken its long-term uptrend line, SS support at RM1.50 in November 2016. It is now at the horizontal support area of RM1.10-1.30.


Chart 3: YTL's monthly chart as at Nov 13. 2017(Source: Malaysiastock.biz)

I think the Government's decision on the mode of financing large project must be balanced with the negative impact of undermining one of the important components of our economy, ie. the construction sector. If we let this sector to be weakened- just as we had for the property sector - then the impact on the overall economy will be very severe. If the Government decides to limit the new approach to only MRT3 & ECRL, then the construction sector may enjoy a recovery. Thus you should take a cautious approach when you decide to buy into these beaten-down large construction stocks. I think the Government will announce a limit to its decision with regards to the new 'build and finance' model of undertaking large projects. Good luck.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post.
 However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

SAMCHEM: Earnings Rose

Background

Samchem Holdings Bhd ('Samchem') is a leading industrial chemical distributor in Malaysia. Its operation covers most of the ASEAN countries, including Malaysia, Indonesia, Singapore, Vietnam & Cambodia



Recent Financial Performance

For QE30/9/2017, its net profit rose 22% q-o-q or 11% y-o-y to RM6.3 million while revenue rose 17% q-o-q or 12% y-o-y to RM243 million. The increased revenue was atributed to higher sales, which in turn was due to "the strategic market positioning of the Group in the ASEAN region."


Table: Samchem's last 11 quarterly results


Graph: Samchem's last 11 quarterly results

Financial Position

Samchem's financial position is deemed satisfactory with adequate liquidity (based on cyrrent ratio of 1.6x) while leverage is a bit elevated (based on total liabilities to total equity of 1.9x).

Valuation

Samchem (closed at RM1.04 yesterday) is now trading at a PER of 10x. Its dividend yield is decent at 3%. Based on recent strong growth (of at least 30%), Samchem has a PEG ratio of 0.3x. For a growth stock, this PEG ratio is deemed low and it makes the stock fairly attractive.

Technical Outlook

Samchem broke above its intermediate downtrend line, R1-R1 at RM0.60 in early September. It rallied to a high of around RM1.00 and then formed a rising wedge ('ABCD'). Today it broke to the upside of the wedge at RM1.03. If Samchem can stay above the breakout level, it may test the line connecting its recent peaks, XY at RM1.07. If it can also break above this line, it may go into its next upleg.


Chart: Samchem's daily chart as at Nov 13. 2017_10.00am(Source: Malaysiastock.biz)

Conclusion

Based on good financial performance and position and fairly attractive valuation, Samchem is a good stock for long-term investment.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post.
 However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Sunday, November 12, 2017

Petdag: Earnings Soared

Result Update

For QE30/9/2017, Petdag's net profit increased 210% q-o-q or 206% y-o-y to RM762 million while revenue rose 3% q-o-q or 22% y-o-y to RM6.694 billion. Revenue rose q-o-q mainly due to higher sales volume by 7%, offset by a decrease in average selling price by 3%.

Group operating profit rose by RM131.8 million mainly due to:

  • improved margin of RM151.4 million from Mogas in line with the increasing MOPS price trend during the quarter; and
  • higher other income of RM4.1 million mainly from Mesra income.
This was partially offset by higher operating expenditure by RM24.5 million attributable to increase in salaries, wages and benefits.

Group net profit jumped due to an extraordinary gain of RM424.6 million from the disposal of 100% equity interest in a subsidiary, PETRONAS Energy Philippines, Inc and 40% equity interest in an associated company, Duta Inc to P-H-O-E-N-I-X Petroleum Philippines, Inc., an external party of the Group for a fair value consideration of RM560.5 million.


Table: Petdag's last 8 quarterly results

 
Graph: Petdag's last 38 quarterly results

Valuation

Petdag (closed at RM21.60 last Friday) is now trading at a trailing PE of 19.6 times (based on last 4 quarters' estimated recurring EPS of 110 sen). Its dividend yield is decent at 3.6%. Overall, Petadg is deemed fairly attractive.

Technical Outlook

Over the past 2 weeks, Petdag has tumbled down to its intermediate uptrend line, S1-S1 support of RM21.50. If this support failed, Petdag may slide further to the psychological RM20.00 mark or even the long-term uptrend line, SS support at RM19.00. 


Chart 1: Petdag's monthly chart as at Nov 10. 2017(Source: Malaysiastock.biz)


Chart 2: Petdag's daily chart as at Nov 10. 2017(Source: Malaysiastock.biz)

Conclusion

Based the improved financial performance and positive long-term technical outlook , I revised my rating for Petdag from HOLD to a BUY.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post.
 However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Wednesday, November 08, 2017

F&N: Earnings Dropped Sharply

Result Update

For QE30/9/2017, F&N's net profit dropped 72% q-o-q or 60% y-o-y to RM20 million while revenue dropped by 6% q-o-q - but remained unchanged y-o-y - to RM976 million. Overall revenue dropped q-o-q due to lower revenue for F&B Malaysia revenue due to earlier sell-in for the 2017 Hari Raya Puasa festive season (which took place in the third quarter ended 30 June 2017) and intense price pressure from competitors but partly offset by higher exports as well as lower revenue for F&B Thailand revenue mainly due to higher trade spend and input costs. This led to lower profits and in the case of F&B Malaysia, even a small operating loss of RM11.5 million - undoubtedly aggravated by higher advertising and promotions spending, plus lower exports contribution.


Table: F&N's last 8 quarterly results


Graph: F&N's last 44 quarterly results

Valuation

F&N (closed at RM25.44 yesterday) is now trading at a PE of 29 times (based on last 4 quarters' EPS of 88.3 sen). At this PE multiple, F&N is deemed overvalued.

Technical Outlook

F&N has limited upside due to the resistance from the horizontal line at RM25.50. it is likely that F&N will trade sideways for the next few quarters until earnings rise again.


Chart 1: F&N's weekly chart as at Nov 7. 2017(Source: Malaysiastock.biz)


Chart 2: F&N's monthly chart as at Nov 7. 2017(Source: Malaysiastock.biz)

Conclusion

Despite satisfactory financial performance, I rate F&N as a REDUCE due to demanding valuation.


Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post.
 However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Tuesday, November 07, 2017

Gamuda: At the Long-term Uptrend Line

Gamuda, the construction heavyweight, is coming under heavy selling today. It is now testing its first uptrend line, SS at RM4.80. Depending on the severity of this sell-down, the share price may even test the next long-term uptrend line, S1-S1 at RM4.50

At this moment, there is no news in the market that could explain the heavy sell-down in Gamuda. Based strictly on technical analysis, Gamuda share price may find support at RM4.50-4.80.

For investors who have been waiting to get into Gamuda, this could be an opportunity to do so at an attractive price. However the big price drop that we have seen so far today, it is not unlikely that the selling will continue tomorrow or even for the next few days. You would have to track the stock closely before pulling the trigger. Ideally you will try to get in at RM4.50. Is that possible? Let's wait & see.


Chart: Gamuda's weekly chart as at Nov 7, 2017_3.30pm (Source: Malaysiastock.biz)

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Monday, November 06, 2017

Salcon: Next Upleg Has Begun?

Salcon broke above its downtrend line, RR at RM0.42-0.43 in October. Since then its upside has been capped at RM0.45. Today, it broke above that resistance at RM0.45. This could signal the start of its next upleg. Its next resistance is at RM0.50-0.52.

Based on technical consideration, Salcon could be a good trading BUY. However, you may want to wait for a minor pullback before making your entry. Good luck!


Chart: Salcon's daily chart as at Nov 6, 2017_2.35 (Source: Malaysiastock.biz)

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Wednesday, November 01, 2017

Johotin: Warrant Price Movement Shows The Way

When a security performs contrary to your expectation, it is worthwhile to take a closer look. This rule applies to a selective few situations; one of which is prices of expiring warrants and their mother shares normally decline as the expiry date approaches.


Market Observation

In the past 6 days, Johotin-WA has been going higher. It climbed off its low at RM0.40 on October 25 to trade now at RM0.51. The share price has also climbed off its low at RM1.30 to at RM1.41 now. At these prices, Johotin-WA is trading at a discount of 5 sen or 3.87%. The warrant has an exercise price of RM0.85 and is due to expire on November 21, 2017.

The rebound in the share & warrant prices could be driven by some incentives announced in the recent budget. That does not change the underlying dynamic of warrant-holders selling off and/or shareholders engaging in "negative" arbitraging activities - selling the shares & buying the warrants - that creates a negative vicious cycle.

Recent Financial Result

Johotin's latest quarterly result is for the QE30/6/2017. Its next result for QE30/9/2017 should be out in late Nivember.

For QE30/6/2017, Johotin's net profit dropped 33% q-o-q or 26% y-o-y to RM6.9 million while revenue rose 20% q-o-q or 7% y-o-y to RM123 million. Johotin's PBT dropped q-o-q due to lower PBT from tin manufacturing segment - decreased from RM6.27 million to RM4.13 million - mainly due to one-time gain on disposal of machinery, and lower PBT from F&B segment - decreased from RM7.8 million to RM5.1 million - mainly due to allowance for doubtful debts in the current quarter. If these "negative" development did not happen, its profit would be maintained.


Table: Johotin's last 8 quarters' P&L


Graph: Johotin's last 31 quarters' P&L

Financial Position

As at 30/6/2017, Johotin's financial position is deemed acceptable, with high current ratio at 2.1x but elevated gearing ratio at 1.0x.

Valuation

Johotin (closed at RM1.41 as at 3.30pm) is trading at a trailing PER of 10.4x (based on last 4 quarters' EPS of 13.56 sen). Based on earnings CAGR of 45% for the past 2 years, Johotin is deemed fairly attractive.

Technical Outlook

Johotin's recent price decline has given out a negative technical outlook for the stock. It should have good support at RM1.20-1.30. The share price drop was probably due to the decline in its earning, which was brought on by non-recurring losses or write-off.


Chart 1: Johotin's monthly chart as at Nov 1,2017_3.30pm (Source: Malaysiastock.biz)  

You can see Johotin-WA prices have hooked up thsi week.


Chart 2: Johotin-WA's weekly chart as at Nov 1,2017_3.30pm (Source: Malaysiastock.biz)  

Conclusion

Based on good financial performance & position, attractive valuation and bullish market observation, I believe Johotin is a good stock to consider for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.