Wednesday, October 31, 2018

Gtronic: Earning Continued to Grow

Result Update

For QE30/8/2018, Gtronic's net profit rose 153% q-o-q or 64% y-o-y to RM24 million while revenue rose 23% q-o-q or 1% y-o-y to RM88 million. Revenue & profits dropped q-o-q due to higher volume loadings from certain customers in the Group as well as better utilization of our operational resources and facilities.


Table: Gtronic's last 8 quarterly results

Quarterly profits rose to the high achieved in QE31/12/2017, despite a lower revenue. This was due to higher profit margins which may not be sustainable.


Chart: Gtronic's last 51 quarterly results

Financial Position

Gtroni's financial position is healthy with current ratio at 2.7 times and gearing ratio at 0.3 time.

Valuation 

Gtronic (closed at RM2.27 yesterday) is now trading at a PE of 37 times (based on last 4 quarters' EPS of 8.98 sen). At this elevated PER, Gtronic is deemed fully valued.

Technical Outlook

Gtronic has been correcting in the past 2 months after it broke its intermediate line, S1-S1 at RM2.60. It is now resting on the horizontal line at RM2.15. 


Chart 1: Gtronic's daily chart as at Oct 30, 2018 (Source: Malaysiastock.biz)

Despite the near-term weakness, Gtronic is still comfortably above its long-term uptrend line, SS.


Chart 2: Gtronic's weekly chart as at Oct 30, 2018 (Source: Malaysiastock.biz)

Conclusion

Based on satisfactory financial performance and strong financial position, Gtronic can be 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.

Tuesday, October 30, 2018

Market Outlook as at October 30, 2018


On October 24, I've noted that FBMKLCI is likely to find support at 1670 for 2 reasons, namely:
1) it is the line connecting the low for the past 3 years (see chart below)
2) it is the middle line of an upward channel that stretches back for 20 year (for more, go here).
Chart 1: FBMKLCI's weekly chart as at Oct 30, 2018_11.45 (Source: Malaysiastock.biz)

If the index can hold at or above 1670 for a few days, then that support is intact and the market may stage a recovery. Today we might be seeing the start of that recovery. 

After another overnight drop for Dow Jones, one would expect our FBMKLCI to go lower. As at 12.00 noon, FBMKLCI is up 12 points to 1695. That's a pleasant surprise! Even before this small rebound, I have been feeling more positive about the market as FBMKLCI has been hovering above the critical 1670 mark for a few days. 

For me, the risk to this market has been substantially discounted. In fact, the discounting of potential bad news on the domestic front (such as project cancellation to new taxes in the budget) to foreign front (such as trade war between China & the US as well as sharp drop on Wall Street) has turned our market into a one-way street: DOWN! Having watched the steady market decline for the past few weeks, I have a gut feeling that this market is deeply oversold and the risk has now swung from downside risk to upside risk. In addition, I have a feeling that Dr. M and Lim Guan Eng will deliver a reasonably good budget which will provide a catalyst for the recovery in 2019. They have to do that; our economy cannot afford to continue with the slow death any longer!

Based on the above, I think it is not the time to sell in the market. In fact, it might well be a good time to start buying. Good luck! 

TMCLIFE: Earning Continued to Impress

Result Update

For QE31/8/2018, TMCLife's PBT rose 34% q-o-q or 59% y-o-y to RM10.7 million while revenue was mixed- down 3% q-o-q but rose 10% y-o-y to RM43 million. Revenue rose 10% y-o-y due to higher patient load and higher intensity cases handled. PBT rose 59% y-o-y due to higher profit before tax margin of 25% as compared to 17% recorded in QE31/8/2017 which was mainly due to lower total operating expenditure during the current quarter.


Table: TMCLife's last 8 quarterly results


Graph: TMCLife's last 30 quarterly results

Financial Position

TMCLife's financial position is deemed healthy with current ratio at 5.4 times and gearing ratio is lower at only 0.1 time.

Valuation

TMCLife (closed at RM0.73 yesterday) is now trading at a PE of 46 times (based on annualized EPS of 1.6 sen). Based on PER, TMCLife is deemed overvalued.

Technical Outlook

TMCLife has been rising in a long-term uptrend line, SS up to June 2016. Since them, its uptrend has accelerated slightly to a new uptrend line, S1-S1. The support from the accelerated uptrend line is at RM0.73.


Chart: TMCLIfe's weekly chart as at Oct 29, 2018 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance, strong financial position and positive technical outlook, TMCLife could still a good stock for long-term investment. However, its valuation is deemed unattractive, which will cap its upside.

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.

Friday, October 26, 2018

Takaful: Earnings Growth Continued

Results Update

For QE310/9/2018, Takaful's net profit rose 67% q-o-q or 73% y-o-y to RM84 million while revenue rose 20% q-o-q or 36% y-o-y to RM649 million. Revenue rose q-o-q due to higher sales generated from Family Takaful and General Takaful business.

Family Takaful business generated higher gross earned contributions of RM436.7 million, increased by 25%, as compared to RM350.2 million in the immediate preceding quarter. The increase was mainly attributable to higher sales from credit related products. General Takaful business generated gross earned contributions of RM177.1 million, increased by 10%, as compared to RM160.3 million in the immediate preceding quarter. The increase was mainly attributable to fire and motor classes.

Profit before zakat and taxation rose q-o-q mainly attributable to higher net wakalah fee income. To understand the fee structure, check out this link.


Table: Takaful's last 8 quarters' results


Graph: Takaful's last 50 quarters' results

Valuation

Takaful (at RM3.86 as at 11.30am) is now trading at a PE of 12.2 times (based on the last 4 quarters' EPS of 31.65 sen). For a growth stock with 3-year CAGR of 21%, Takaful's PEG ratio is about 0.6 time. As such, Takaful is deemed attractive.

Technical Outlook

Takaful has been range-bound for the past 3 years, with support at RM3.25 and resistance at RM4.00.


Chart: Takaful's monthly chart as at Apr 25, 2018_10.00am (Source: Malaysiastock.biz)

Conclusion

Based on satisfactory financial performance and attractive valuation, Takaful remains 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.

Thursday, October 25, 2018

US Market Outlook as at October 24, 2018

US markets dropped sharply overnight. If we were not sure that the current uptrend which began in February 2016 is over, last night's sharp drop should have sealed the deal for you that the current uptrend is over. You can see the weekly charts for DJIA and Nasdaq.


Chart 1: DJIA's weekly chart as at Oct 24, 2018 (Source: Stockcharts.com)


Chart 2: Nasdaq's weekly chart as at Oct 24, 2018 (Source: Stockcharts.com)

Our hope is that the US markets will not plunge but merely correct in a normal mode. These are the potential low depending on the level of retracement in the market. Needless to say, global markets will be dragged lower as would our Malaysian stock market. Good luck!

Table: DJIA & Nasdaq's Potential Retracements & Targets

Note: I've revised the above table to include in yesterday's closing index for easier comparison.

Just one last comment on our market; I believe that FBMKLCI will be testing the 1670 support severely over the next few days. Unless and until FBMKLCI has convincingly broken below the support at 1670 (as per my post dated October 23), our market might withstand the crosswind from US markets better than we fear. For now, we can only sit and wait.

Wednesday, October 24, 2018

Tenaga: Testing Long-term Uptrend Line

In the current market selldown, Tenaga was not spared. It has dropped from about RM15.50 in early October to an intraday low of RM13.80 on October 11. It even closed at RM14.00 yesterday. It is now trading not far from the long-term uptrend line, SS. 

Tenaga is our sole power distributor in Peninsular Malaysia and Sabah. It is also the biggest power producer in the country. Thus it will benefit from continued demand for power in the country.

Tenaga has been valued above RM17.00 by many brokers. For example, Kenanga valued it at RM17.90, AMInvest valued it at RM17.25. HLInvest values it at RM17.50.

Based on good valuation and recent sharp price decline, I believe Tenaga is at a good price level to consider for entry. Good luck!

Chart: Tenaga's monthly chart as at Oct 23, 2018 (Source: Malaysiastock.biz)


Market Outlook as at October 23, 2018

FBMKLCI broke below the psychological 1700 mark yesterday. Its next support is at 1670 from the line connecting the low for the past 3 years. See the weekly chart.  

Chart 1: FBMKLCI's weekly chart as at Oct 23, 2018 (Source: Malaysiastock.biz)

The support at 1670 is a very strong support. If you look at the monthly chart below, you will see that the index has been moving in an upward channel in the past 20 years. We are now coming down to the middle line of that channel, which I denote as S1-S1. It is critical that the index stays above this line. A breakdown may occur if global or regional markets or economy were to take a big fall. For now, I don't see a problem that's serious enough to cause these markets to plunge; thus bringing our index below 1670. I hope I won't be proven wrong on this.

Chart 2: FBMKLCI's monthly chart as at Oct 23, 2018 (Source: Malaysiastock.biz)

Based on the above, our market will likely find support in the next few days. Nevertheless it is hard to sound bullish in this dreary market that has brought prices for many stocks down to unimaginable levels. It takes a lot to make a BUY call these days. My thought goes out to everyone who is still in the market, and who has faith that the market will turn a corner some day in a not-too distance future. Good luck to everyone! Stay strong! Stay safe! 

Monday, October 22, 2018

MYEG: MACC's Highly Unusual Comment

Last Saturday, MYEG announced that it has received a letter from MACC which has purportedly confirmed that MYEG and its directors are not under investigation, nor a party to the investigation leading to charges against Zahid. The announcement on Bursa's website is here.

In addition, I have also looked at 3 sources- The Star, The Edge and FMT and in all of these reports, the party announcing that news was MYEG. There was no letter offered to support this announcement. Meanwhile MACC was completely silenced on this "confirmation or clarification" supposedly given to MYEG. Was MACC approached by The Star or The Edge about the issuance of this letter of confirmation/clarification? That was also absent. This is my take:

I have serious doubt about that comment. As reported, Zahid received money from X in return for helping X secured a contract/project from MYEG. Let’s breakdown the alleged offence in 2 parts. The 1st part is Zahid received money and X received contract/project from MYEG. The 2nd part is Zahid received a favor from MYEG and MYEG obtained/repaid an IOU from/to Zahid.

The amount involved and number of such “transactions” is significant; a total of 24 cheques worth over RM13 million between July 15, 2016 and Feb 8, 2017 were received by Zahid and the party(ies) that made the payments, subsequently secured contracts from MYEG.


If MACC chose not to investigate these offences, it will be in dereliction of its duties. Thus, I don’t put much weight on MYEG’s announcement that MACC has somehow “cleared” the company of any wrongdoing relating to the above alleged offence.

****

Chartwise, MYEG (RM1.38 as at 10.26am) has support at the horizontal line at RM1.33-1.35 or the intermediate uptrend line at RM1.05. The immediate resistance is at the horizontal line at RM1.40 or the short-term downtrend line at RM1.50.

Based on the above, I would recommend a SELL on MYEG at the current price.


Chart: MYEG's daily chart as at Oct 19, 2018 (Source: Malaysiastock.biz)

Friday, October 19, 2018

Zahid Hit with 45 Charges (UPDATED)

Today, our former Deputy Prime Minister, Ahmad Zahid Hamidi was charged in courts for committing 45 offenses, listed below:


For more, go here.

Of interest to us in the stock market are the following charges for receiving gratification:



My take is that the above charges could lead to legal liabilities for Datasonic Group Bhd ("DSONIC") if it can be proven that it offered money to induce the award of the contract by the Minister. In the case of MYEG, it may still be held liable if it were a party to an illegal act. If a company is found guilty of committing an offense, the company may be fined and/or the contract awarded may be terminated. Thus, I can see that implication of these gratification charges may have great impact on DSONIC than on MYEG. Nevertheless, since both companies are dependent on government's contracts in the long run, any blemish on its business conduct will impact its chance of success to secure new contracts or renewal of existing contracts.

*****

Chartwise, DSONIC has broken below the line connecting its recent lows, AB. 


Chart 1: DSONIC's weekly chart as at 19, Oct 2018_12.30 (Source: Malaysiastock.biz)

MYEG is now resting on its intermediate uptrend line at RM1.13. Its next support levels are at RM1.10, RM1.00 & RM0.95.


Chart 2: MYEG's weekly chart as at 19, Oct 2018_12.30 (Source: Malaysiastock.biz)

DSONIC has denied that it had issued any payment to the former DPM (here) while MYEG has requested a suspension of the trading of the shares on the exchange.

In view of the poor market sentiment, the negative news on DSONIC and MYEG will have longer negative implication. If you want to get into these stocks, you have to accept that the potential reward comes with high risk.

(Note: I have attempted to re-present this post with updated information as well as to tidy up the presentation. Alas, the presentation is still less than satisfactory.)

Wednesday, October 17, 2018

US Markets: More Than A Technical Rebound?

Yesterday, DJIA and S&P500 have both tested their long-term uptrend lines and rebounded. See Chart 1 & 2. Nasdaq has also rebounded but it is still below its uptrend line (see Chart3). Volumes traded were relatively thin. We will have to wait and see whether the rebound for DJIA and S&P500 will have follow-thru tonight, and await Nasdaq climbing back above its uptrend line.

Chart 1: DJIA's weekly chart as at Oct 16, 2018  (Source: Stockcharts.com) 

Chart 2: S&P500's weekly chart as at Oct 16, 2018  (Source: Stockcharts.com) 

Chart 3: Nasdaq's weekly chart as at Oct 16, 2018  (Source: Stockcharts.com)

When Heavyweights Dropped

Yesterday we saw a few heavyweights blue chip stocks dropping sharply. Where are the support and resistance and what are their near term outlook?

1. CARLSBG
    Support: RM17.30 (H) & RM16.00 (UPT)
    Resistance: RM18.80 (H) & RM20.00 (H)
    Outlook: Intermediate uptrend line, S1-S1 is still intact.


2. HEIM
    Support: RM17.60 (H) & RM16.40 (H)
    Resistance: RM19.000 (H) & RM20.00 (H)
    Outlook: Intermediate uptrend line, S1-S1 is broken. Long-term uptrend line, SS is intact.  


3. AJI
    Support: RM20.00 (H) & RM19.00 (H)
    Resistance: RM21.00 (H) & RM22.00 (H)
    Outlook: Intermediate uptrend line, S1-S1 broke in June. Sideways movement ahead. 


4. DLADY
    Support: RM63.00 (UPT)
    Outlook: Long-term uptrend line, SS is intact. 



5. F&N
    Support: RM36.00 (H) & RM33.00 (H)
    Resistance: RM38.00 (H) & RM40.00 (H)
    Outlook: Medium-term uptrend line, SS is broken. Sideways movement ahead. 



3. KESM
    Support: RM13.00 (H) & RM10.00 (H)
    Resistance: RM14.60 (H) & RM16.00 (H)
    Outlook: Intermediate uptrend line, SS is broken. Sideways ended. Downtrend has begun.

Tuesday, October 16, 2018

Market Outlook as at October 15, 2018

FBMKLCI is likely to have peaked at 1896 on 16 April. I plotted 3 moving average lines to give me a bearish cross-under. The 3 moving averages are 300-day (simple) moving average (MA), 150-day exponential moving average (EMA) and 100-day weighted moving average (WMA). The bearish cross-under is satisfied when the following occurred:
1) the 100-day WMA crossed below the 150-day EMA, and both of these crossed below the 300-day MA, and
2) the index crossed below all these 3 moving averages.

The last time we saw a similar cross-under was in 2015 (see the pink arrows). The index dropped and stabilized before it dropped again. After that, it moved sideways for about a year. We may or may not see something similar.

Chart 1: FBMKLCI's daily chart as at Oct 15, 2018 (Source: Malaysiastock.biz)

The next chart is a weekly chart which includes a line that's my own "invention". It is the blue line (denoted as 'AB') which acts as a support to the market. It is not an uptrend line- unlike the tentative uptrend line (in green & denoted as 'SS'). Our FBMKLCI is now resting on this support line, AB. The last time we broke below this line decisively was during the Global Financial Crisis of 2008. Given the sharp drop in a few emerging market currencies (including our neighbor, Indonesia), it is possible, not probable, that we could be in early day of another financial crisis. The oft-mentioned 10 or 12-year cycle is another theme that is being used to forewarn about an impending market selldown. Whatever it may be, if FBMKLCI were to go below its last week low of 1682, we could see a selldown more severe than what we saw in 2015. Stay tuned...

Chart 2: FBMKLCI's weekly chart as at Oct 15, 2018 (Source: Malaysiastock.biz)



Monday, October 15, 2018

US Markets: At A Critical Juncture

DJIA managed to recover last Friday to stay above its uptrend line (at 25300) as well as its 200-day EMA line (at 25000). See Chart 1. If it failed to stay above these critical levels (2500-25300), the uptrend for DJIA may be over and the index may move sideways like what it did from May 2015 to November 2016. See Chart 2.

Chart 1: DJIA's daily chart as at Oct 15, 2018_9.45am (Source: Stockcharts.com)

Chart 2: DJIA's weekly chart as at Oct 15, 2018_9.45am (Source: Stockcharts.com)

If we look at Nasdaq, we can see that this index has broken below its uptrend line (at 7700) as well as its 200-day EMA line (at 7450). It has been a few days since the breakdown occurred - which may confirm the end of the uptrend. See Chart 3. This could mean that Nasdaq index may move sideways like what it did from July 2015 to November 2016. See Chart 4.


Chart 3: Nasdaq's daily chart as at Oct 15, 2018_9.45am (Source: Stockcharts.com)


Chart 4: Nasdaq's weekly chart as at Oct 15, 2018_9.45am (Source: Stockcharts.com)

In the above scenario, I am assuming that sideways movement would follow after the end of an uptrend. That's a mild assumption. The bearish assumption would be for a market that has peaked, to go into a downtrend. At this moment, it is too early to call to make that call because we are not entirely sure the long-term uptrend is over yet. So, let's fasten the seat belt for we may have a bumpy ride ahead.

Topglov: Earnings Remained Healthy

Results Update

For QE31/8/2018, Topglov's net profit dropped 13.6% q-o-q but rose 3.0% y-o-y to RM102 million while revenue rose 10.6% q-o-q or 34.8% y-o-y to RM1,22 million. The q-o-q increase in revenue is attributed to sales volume grew 6% versus 3QFY18. The improved performance was attributed to improvements in higher gloves volume sold, production efficiency and quality, coupled with new capacity coming onstream and strong demand growth. However, Profit After Tax was softer, impacted by higher tax expense. The upward trend in nitrile latex prices compared with 3QFY18 also caused some pricing pressure. The average natural rubber latex price eased 2.7%, while the average nitrile latex price was on the uptrend, increasing by 13.9%.

 
Table: Topglov's last 8 quarterly results


Graph: Topglov's last 49 quarterly results

Financial Position

Topglov's financial position is deemed satisfactory with adequate current ratio at 1.15 times while gearing ratio is elevated at 1.18 times.

Valuation

Topglov (closed at RM10.78 last Friday) is now trading at a trailing PE of 31X (based on last 4 quarters' EPS of 34.40 sen). At this PER, Topglov is deemed fully valued.

Corporate Exercise 

Topglov has proposed a 1-for-1 bonus issue which will go ex on Oct 24.

Technical Outlook

Topglov has to surpass the July high of RM12.48 to regain its uptrend again. The sudden plunge from that recent high came about when it announced that its acquisition of Aspion Sdn Bhd from Adventa Capital Pte Ltd was based on misleading information, and that it would be taking legal action to recover the loss (here).


Chart 1: Topglov's weekly chart as at Oct 12, 2018 (Source: Malaysiastock.biz)


Chart 2: Topglov's monthly chart as at Oct 12, 2018 (Source: Malaysiastock.biz)

Conclusion

Based on good financial performance and an upcoming bonus issue, I think Topglov will likely to continue its uptrend. 

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.

Bursa Uni Day 2018


Bursa Malaysia will be holding Bursa Uni Day 2018 next weekend to help young Malaysian university students to find answers for all their questions about investing. The theme for this year Bursa Uni Day is "Invest Bursa, Invest in You".

This event is open to the public. Anyone, from young to old, can join this investment carnival.


On Bursa Uni Day, you can expect:
- Top notched industry experts to share their trading and investment experiences with you
- Understand more about the possible careers in the capital market
- Exhibition and game booths for you to explore and learn while having fun!
- Watch the finale of the Bursa Malaysia National Investment Debate Challenge by our BYIC students!
- Meet famous celebrity emcee and a mysterious performance by a hypnotist and mentalist!
- Stand a chance to win amazing lucky draw prizes!
- Delicious food by our hand-picked food trucks

Event Details:
Date: 20th October 2018
Time: 9am – 5pm (Registration starts at 8am)
Venue: Monash University Malaysia Campus
Registration: http://mylifechamp.com/bursauniday2018
Register now for Bursa Uni Day and enjoy a full day of edutainment at absolutely no-charge! Hurry up, while the FREE seats still last.

Friday, October 12, 2018

Dow Jones Broke Its Uptrend Line

Yesterday DJIA broke its long-term uptrend line at 25200. If there is no recovery, DJIA will follow Nasdaq which broke its uptrend line at 7700 on October 9. 


Chart 1: DJIA's weekly chart as at Oct 11, 2018 (Source: Stockcharts.com)


Chart 2: Nasdaq's weekly chart as at Oct 11, 2018 (Source: Stockcharts.com)

We have to wait and see whether US markets can stabilize next week or go down further.


Thursday, October 11, 2018

Gamuda: Time to Smoke the Peace Pipe!

Despite the 800 plus point drop on Wall Street overnight, our investors and punters will be glued onto Gamuda for the next few days. After 2 days of drum beating, senses have now begun to prevailed. The Prime Minister has indicated that the Government shall review the cancellation of the MRT2 Underground Contract that was being undertaken by MMC Gamuda.MMC Gamuda said that it would adopt an open book approach - which it refused to do previously - provided the review is undertaken by an international engineering consulting firm and its Intellect Property (IP) rights and commercially sensitive  information are respected.

If this review can break the deadlock and lead to cost-saving as well as MMC Gamuda remaining as the contractor, then the win-win solution has been achieved. Obviously the Government must not appear soft in this review and negotiation because we would be sending the wrong signals to other parties with whom the Government will negotiate next- such as the Chinese parties undertaking the ECRL project or the Singapore Government in the HSR project.

Meanwhile, Gamuda looks much more attractive after the big drop. It is now resting on the horizontal line at RM2.00. This could be a good entry to the best construction company in Malaysia.


Chart 1: Gamuda's monthly chart as at Oct 10, 2018 (Source: Malaysiastock.biz)

The second largest construction company, IJM has also dropped to a very attractive level of around RM1.40. Like Gamuda, this stock should have good support at the horizontal line of RM1.35, thus presenting a good entry to the stock.

Chart 2: IJM's monthly chart as at Oct 10, 2018 (Source: Malaysiastock.biz)

Given the big fall in US and the challenging fiscal position of our Government, I expect the near term outlook for our market to be weak. However the sharp drop in Gamuda and IJM gives us an opportunity to buy into these stocks at attractive price level. If you are a long-term investor, this opportunity should not be missed. Good luck!

Wednesday, October 10, 2018

Market Outlook as at October 10, 2018

On October 7, the market was shocked by the surprising news of the termination of MRT2 underground job. While the latest cost-saving effort is similar to the reduction in the scope of work and the contract value for LRT3, which was announced in July, the timing of its announcement less than 1 month before the reading of the 2019 Budget on November 2 (here) gave away the likelihood that this budget will not come with goodies for Malaysians. This will be a very tough budget. To underline the difficulty, the PM has even announced that the Government may have to impose new taxes or sell off some assets to pay down the debts (here). 

These announcements will cause much anxiety in the market, and if left unguided, it will lead to market selldown. The chart for FBMKLCI shows that the index is now precariously resting on the "horizontal line" at 1770. A breakdown of this support will send the index to the May low of 1710 or even to re-test the June low of 1660.


Chart: FBMKLCI's daily chart as at Oct 9, 2018 (Source: Malaysiastock.biz)

Given the challenging market ahead, investors and traders must re-look their portfolio and reduce their position to cushion against the storm ahead. Good luck!

Friday, October 05, 2018

PMETAL: What's Up?

Yesterday PMetal broke above the horizontal line at RM5.00. This bullish breakout could send the share price higher to challenge the horizontal lines at RM5.20 or RM5.35 or even the all-time high at RM5.75. What could possibly explain the surge in the share price for PMetal?


Chart 1: PMETAL's daily chart as at Oct 4, 2018 (Source: Malaysiastock.biz)

For answer, you have to look at the price of aluminium. This metal surged on October 3 to a high of USD 2237. Yesterday, it went up further to an intraday high of USD2266 before correcting back to close at USD2170. The chart shows that aluminum has tested the line connecting the peaks for the past 9 months and corrected back. I believe the metal is likely to continue to correct for the next few days or weeks.


Chart 2: Aluminum daily chart as at Oct 4, 2018 (Source: Investing.com)

Based on the above, I believe that it is a good time to take some profit on PMETAL as well as other aluminium stocks (especially ALCOM). Good luck!

AEONCR: Earning Dropped!

Result Update

For QE31/8/2018, AEONCR's net profit dropped 18.7% q-o-q but rose 13.0% y-o-y to RM80.6 million while revenue rose 2.3% q-o-q or 7.0% y-o-y to RM333 million. Pre-tax profit dropped 18.6% mainly due to higher impairment loss on financing receivables of RM95.263 million for the current quarter as compared to RM57.096 million for QE31/5/2018.


Table: AEONCR's last 8 quarterly results


Graph: AEONCR's last 45 quarterly results

Valuation

AEONCR (closed at RM15.86 yesterday) is now trading at a PE of 12.2 times (based on last 4 quarters' EPS of 130.19 sen). At this PER, AEONCR is deemed fairly attractive. In addition, it pays a decent dividend with DY of 2.7% (based on last year dividend of  42.25 sen).

Technical Outlook

In May, AEONCR broke above its November 2017 high of RM14.40. Since then, it has slowly climbed to a new all-time high of RM16.46 on September 27. Given the break in the steady profit growth, AEONCR share price is likely to drop back significantly for the next few days. Its immediate support at the horizontal line of RM15.00 may be violated. It may even test the next support at the horizontal line of RM14.40.


Chart 1: AEONCR's daily chart as at Oct 4, 2018 (Source: Malaysiastock.biz)


Chart 2: AEONCR's weekly chart as at Oct 4, 2018 (Source: Malaysiastock.biz)

Conclusion

Despite the surprising decline in its financial performance, AEONCR is still a good stock for long-term investment in view of its fairly attractive valuation and still positive technical outlook. However, the share price will be weak for the next few days or weeks. Any buying should be carried out slowly and with long-term horizon in mind. 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.