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Wednesday, January 17, 2018

ANNJOO: At the Uptrend Line!

In the past 2 years, Annjoo enjoyed a price run-up of more than 6 folds, from 60 sen to almost RM4.00. This makes Annjoo the best performing steel producer in our market.

Annjoo's share price has pulled back to its uptrend line in the current correction. If you stick to the rule that a trend remains intact until it has reverse, then this would be a buying opportunity. While indicators - like ADX & MACD - are cautioning against possible break of the uptrend line, until that has happened the trend remains intact.    


Chart 1: ANNJOO's weekly chart as at Jan 16, 2018 (Source: Malaysiastock.biz)

Why did Annjoo drop so much in the past 2 weeks? The drop in Annjoo's share price could be due to the correction in steel rebar prices in China in the past 2 months. Rebar prices peaked at 4950 yuan in December last year, and is now trading at 3800 yuan- a drop of 25%!


Chart 2: China Steel Rebar Price chart as at Jan 16, 2018 (Source:Sunsirs.com)

Is this a short-term correction or has steel rebar prices peaked? Looking at the chart below, we can see that the last 2 years rally is fairly similarly to the 200-2008 rally which ended during the Global Financial Crisis. While there is no crisis on the horizon, a reversal in the price uptrend could lead to lower steel prices and lower earning for steel companies.


Chart 3: Global Steel Rebar Price chart as at Jan8, 2018 (Source: Steelbenchmarker.com)

Based on the above, we must be careful to avoid over-exposing ourselves to a sector that's in peak earning today. As for Annjoo, you would have to monitor closely and be prepared to take the necessary action to reduce your position in the event the share price breached the uptrend line at RM3.60.

Thursday, January 11, 2018

Market Outlook as at January 11, 2017

As at 12.05pm, FBMKLCI was down 8 points to 1815. The scoreboard showed 180 gainers to 730 losers. Many investors who wanted a correction after a strong rally, seem to have second thoughts. It all goes to show that no one wants correction. Period!

Looking at the daily chart, I believe that this correction has gone far enough to whine off excessive bullishness that we saw over the past 2 weeks. I believe FBMKLCI will soon find support at the 10-day SMA line at 1807. Failing which, it may test the psychological 1800 level. If the index is going into its next upleg, that market should stabilize by then.


Chart 1: FBMKLCI's daily chart as at Jan 11, 2018_12.05 (Source: Shareinvestor.com)

Looking at the weekly chart, we can see that FBMKLCI has broken above the intermediate downtrend line, RR that stretches back to 2014. This breakout is the reason for the strong rally in the past 2 weeks. The correction has set in after the index hit the parallel line, R1-R1 at 1820.


Chart 2: FBMKLCI's weekly chart as at Jan 10, 2018(Source: Shareinvestor.com)

Based on the bullish breakout of the intermediate downtrend line, R1-R1 and my earlier market expectation, I think that this correction is an opportunity to buy or add to your position to ride the upleg. Good luck!

Monday, January 08, 2018

Evergrn: Awaiting Earnings Recovery

Results Update

In QE30/9/201, Evergrn's net profit rose 144% q-o-q but dropped 11% y-o-y to RM15.1 million while revenue rose 0.4% q-o-q or 7% y-o-y to RM260 million. Its  revenue increased q-o-q mainly due to commercial run of new Particle Board Plant in Segamat. Its profit before tax increased q-o-q mainly due to production efficiency and effective cost measures of new Particle Board Plant in Segamat.


Table: Evergrn's last 8 quarters' financial performance


Graph: Evergrn's last 51 quarters' financial performance

Financial Position

As at 30/9/2017, Evergrn's financial position is deemed satisfactory with current ratio at 2.05 times and gearing ratio at 0.34 time.

Valuation

Evergrn (closed at RM0.69 last Friday) is now trading at a trailing PER of 12 times (based on last 4 quarters' EPS of 5.87 sen. At this PER, Evergrn is still deemed fairly valued.

Technical Outlook

Evergrn has been in a slow decline after it peaked at RM1.68 in January 2016. The decline takes the form of a downward channel, with the lower line at RM0.65 providing support. 



Chart: Evergrn's weekly chart as at Jan 5, 2017 (Source: Malaysiastock.biz)

Conclusion

Based on satisfactory financial performance & position and reasonable valuation, Evergrn is a good stock for long-term investment. However, its share price recovery will only begin once earnings begin to improve noticeably.

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, January 07, 2018

Market Outlook as at Jan 9, 2018

For the past 2 weeks, the market has been so charged up that many investors are blindsided and left standing at the sideline. Many are like the bears that had recently awaken from their hibernation, and standing in the Adams River in a full-blown salmon run. 

Today I will not talk about what stocks to buy. You have to look through the charts to get ideas on trading or investing. FBMKLCI has broken above the June 2017 high of 1795 as well as the psychological 1800 level. While correction may come any time now - and correction is not a bad thing - I believe any correction will not be long and deep. The market has an appointment to meet: 1900 sometime this year. That's not all! I believe that our market could potentially peak only in 2019. See my earlier market outlook (here).


Chart 1: FBMKLCI's daily chart as at Jan 6, 2018 (Source: Shareinvestor.com) 


Chart 2: FBMKLCI's monthly chart as at Jan 6, 2018 (Source: Shareinvestor.com) 

My July 2017 bullish market outlook is predicated on two assumptions:
1. US markets, which are at all time high, shall avoid a crash.
2. MYR shall avoid another bout of weakening.

From Chart 3 below, we can see that USD-MYR is now in a downtrend, with MACD below the zero line and the +DMI  and ADX are rising fast.


Chart 3: USD-MYR's weekly chart as at Jan 6, 2018 (Source: Investing.com) 

Some investors believe that MYR recovery is due to the improvement in crude oil prices. This may be true, and we can see that Brent crude oil prices are on a steady increase. However I believe the USD67-69 will be a strong resistance which may cap price rise for the next 2-3 months.


Chart 4: Brent's weekly chart as at Jan 6, 2018 (Source: Investing.com) 

If you are sitting on a pile of cash, this is a good time to lose the cash. By that, I mean you deploy your cash quickly in the market. Good luck!!

Tuesday, January 02, 2018

Harta: Earnings Shot Up!!

Result Update

For QE30/9/2017, Harta's net profit rose 18% q-o-q or 59% y-o-y to RM113 million while revenue was mixed - down 3% q-o-q but up 34% y-o-y - to RM585 million. Revenue dropped q-o-q mainly due to lower average selling price arising from more competitive pricing but the sales volume increased by 5.2% due to increase in demand. PBT rose q-o-q mainly due to lower nitrile and latex cost, lower chemical cost and improvement in operation efficiency.


 Table: Harta's last 8 quarterly results


Graph: Harta's last 40 quarterly results

Valuation

Harta (closed at RM10.68 last Friday) is trading at a trailing PER of 48 times (based on last 4 quarters' EPS of 22.21 sen). At this PER, Harta has surpassed Nestle in term of trailing PER. At RM103.20, Nestle's trailing PER is now at 42 times!

Technical Outlook

Harta broke above a upward "Cup with handle" formation at RM7.80. Assuming a 1-to-1 extension, Harta should reach a high of RM10.20. Well it did better than that. It overshot the RM11.00 before correction set in. How long will correction last? Only time will tell.


Chart: Harta's weekly chart as at Dec 29, 2017 (Source: Malaysiastock.biz)

Conclusion

Based on improved operating performance, strong leadership in the glove sector and capable management team, Harta is considered a good stock for long-term investment. Its rating is kept at HOLD due to its 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.