Salcon- potential speculative play?

Last Friday, when FBMKLCI dropped 25 points on opening bell, there was one stock that defied the fall. That stock was Salcon, a smallish water and waste water engineering company that has shown its intention to venture into the property development sector.

Venturing in property development is a no-brainer these days but Salcon is no ordinary newcomer. Sitting in its board of directors is Datuk Leong Kok Wah. He sat on the board of director of SP Setia. The market knew of Leong as well as the imminent departure of SP Setia's MD, Tan Sri Liew Sin Kee from that company. There were speculations of where Liew would team up for his personal property development business when he departs from SP Setia (expected to be in early 2015). One of these companies being talked about is Salcon. Last Friday, we learned that Salcon would tie up with Eco-World Development Sdn Bhd to develop a RM1.2 billion mixed commercial development in Johor. One of the shareholders of Eco-World is Liew's son. For more on Salcon, go here.

From Chart 1, we can see that Salcon rose 10 sen from RM0.57 to RM0.67 last Friday. Its immediate resistance is the horizontal line at RM0.70 while the immediate support is the horizontal line at RM0.55. It must be noted that Salcon has broken above its long-term downtrend line at RM0.55 in May. This breakout means that Salcon's downtrend is over and the stock will either move sideway or begin its upleg.



Chart 1: Salcon's 15-min chart as at June 21, 2013 (Source: Quickcharts)


Chart 2: Salcon's weekly chart as at June 21, 2013 (Source: Quickcharts)

As noted earlier, Salcon is a small company. For FYE31/12/2012, it reported a pre-tax profit of RM40 million on a revenue of RM344 million. In the previous year, Salcom reported a pre-tax profit of RM29 million on a revenue was RM472 million. The drop in revenue was due mainly to lower revenue from the Construction division (which dropped from RM240 million to RM142 million, due to lower book order) as well as lower revenue from the Concession division (which declined from RM219 million to RM189 million). Net profit from the Concession division soared from RM24 million to RM43 million (due to a gain on bargain purchase on the acquisition of a subsidiary) which more than offset the net loss of RM12 incurred by the Construction division. For 1Q2013, Salcon reported a pre-tax profit of RM7.7 million (an increase of RM2.0 million from RM5.7 million previously) while revenue unchanged at RM79 million.

Salcon (closed at RM0.67 on Friday) is now trading at a PE of 30 times (based on EPS of 2.2 sen for FY2012). Salcon's Price to Book is 0.83 time (based on NTA per share of RM0.81 as at 31/3/2013). Salcon's valuation is unattractive.

Based on technical consideration, Salcon could be a promising stock for a speculative play. The stock's fundamental (high valuation and unexciting financial performance) may not warrant an over-sized bet for now. To get a favorable return, you may aim to get into this stock at RM0.55-0.60. 

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, Salcon.

US Equity Markets likely to drop further

DJIA, S&P500 & Nasdaq broke below their respective 50-day SMA line. This breakdown could signal a temporary top for US markets. I believe these markets would slowly slide back to their 2 years old uptrend line for support. If this scenario panned out, global equity markets for the next 1-2 months would not be good.


Chart 1: DJIA's daily chart as at June 20, 2013 (Source: Stockcharts)


Chart 2: S&P500's daily chart as at June 20, 2013 (Source: Stockcharts)


Chart 3: Nasdaq's daily chart as at June 20, 2013 (Source: Stockcharts)

Gold lost its glitter!

When Gold broke above its intermediate downtrend line (RR) in September 2012, gold bugs everywhere cheered. They expected Gold to revisit its high of USD1900 recorded in August 2011. See Chart 1.


Chart 1: Gold's 3-year chart as at June 20, 2013 (Source: Stockcharts)

Alas, Gold failed to come close to the 2011 high. It managed to chalk up a high of only USD1800. From then only, Gold slid steadily (see Chart 2). It broke support after support and yet, the gold bugs kept their faith in this safe haven asset. That was before April this year. In April, Gold broke below the strong horizontal support of USD1530 and hit an intra-day low of 1330. 


Chart 2: Gold's daily chart as at June 20, 2013 (Source: Stockcharts)

The first break of the important technical support should put fear into the heart of investors. However, some investors or speculators were not deterred. They plunged in and loaded up on the glittering stuff. In China, there were scenes of large crowd lining up to buy gold.


Picture: 10,000 people lining up to buy gold in China (Source: Freerepublic.com)

If they have seen the next chart, I don't think the crowd would have lined up to buy Gold. Gold is a commodity that shot up in times of trouble or financial distress. And, when the troubling times are over, it would drop back for a long, long time. Are we about to see the repeat of this.


Chart 2: Gold's monthly chart from 1960 to 2010 (Source: Academic.ru)

Yesterday, Gold broke another strong horizontal support at USD1310. The Great Gold Rally of 2013 is likely to be over!

YeeLee & Spritzr- rising in tandem?

Yesterday, Spritzr broke above the RM1.50-1.53 resistance. It touched an intra-day high of RM1.77 today- despite the bad market following the sharp drop in DJIA overnight. We may see further upside to Spritzr after a bit of correction.


Chart 1: Spritzr's weekly chart as at June 20, 2013_12.30pm (Source: Quickcharts)

My interest is on YeeLee, which holds a substantial 38%-stake in Spritzr. This stock seems to move in tandem with Spritzr. The rally in Spritzr prompted the price of YeeLee to test its recent high of RM1.26 this morning before succumbing to profit-taking in the afternoon. I believe there is a good chance that YeeLee would re-test this level in the days ahead. An upside breakout of the RM1.26 mark could send the stock to my target of RM1.70.

Look out for YeeLee.


Chart 2: YeeLee's weekly chart as at June 20, 2013_12.30pm (Source: Quickcharts)

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, YeeLee & Spritzr.

UTDPLT- What's Up?

While Plantation index has recovered marginally, it hasn't broken above its intermediate downtrend line. I have presented below the composite chart of Plantation index and three plantation stocks for comparison. You would see the following:
1. KLK is testing its intermediate downtrend line
2. UMCCA has brokwn above its intermediate downtrend line and may revisit its recent high
3. UTDPLT has broken above its recent high and charging higher.

I have mentioned about UTDPLT's technical strength before (here). To see it again in such stark contrast to the Plantation index and other plantation companies, one couldn't help but wonder what's up with UTDPLT. See Chart 1 below.


Chart 1: Plantation, KLK, UMCCA & UTDPLT's weekly chart as at June 20, 2013_12.15pm (Source: Quickcharts)

FYE31/12/2012, UTDPLT reported a net profit of RM342 million on a revenue of RM1.183 billion. This is a decline from a net profit of RM374 million on a revenue of RM1.398 billion reported in FYE31/12/2011. For 1Q2013, its net profit dropped to RM65 million from RM73 million previously while revenue also declined from RM216 million from RM339 million. Based on its results for 1Q2013, UTDPLT's annualized EPS is about 124 sen. At the closing price of RM30.90 in the morning trade, UTDPLT has a PE of 25 times.

The weekly semilog chart (from Tradesignum where share price is not adjusted for dividend) shows a stock that is marching up in a steady upward channel. If the upper boundary of the channel is the target (better treat it as a cap), UTDPLT may hit a high of RM40-45.


Chart 2: UTDPLT's weekly chart as at June 19, 2013 (Source: Tradesignum)

Incidentally, CPO has just broken above its intermediate uptrend line at RM2450 yesterday. With this breakout, we may see further upside to CPO is the second half of this year.


Chart 3: CPO's weekly chart as at June 19, 2013 (Source: ifs.marketcenter)

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, UTDPLT.

Nadayu is in a sharp rally

A few days ago, a reader inquired about Nadayu. I commented that it is "range-bound at RM0.80 & RM0.95 for about a year now. I would say it is the stock (that) is a buy at RM0.80 if you have a long investment time horizon" (here). Before you know it, Nadayu broke above the trading range at RM0.95 (which happens to be the intermeiaite downtrend line. It subsequently broke through the psychological RM1.00 mark as well as the horizontal lines at RM1.10 and RM1.20. At the pace the stock is jumping, it may revisit its recent high of RM1.38 soon.

However, I would advise caution since Nadayu has had such a strong rally. If you have this stock, you may want to take some profit. If you do not have the stock and you want to get in, let it consolidates the recent gain. A pullback to RM1.00-1.10 level would buy you some safety margin before making your entry.

Chart: Nadayu's weekly chart as at May 20, 2013_12.15am (Source: Tradesignum)

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, Nadayu.

AEONCR- benefitting from strong consumer spending

Result Update

For QE20/5/2013, AEONCR's net profit increased by 6% q-o-q or 47% y-o-y to RM41 million while revenue increased by 9% q-o-q or 42% y-o-y to RM144 million. The improved financial performance was mainly due to "growth in receivables and increased financing transaction volume in the period contributing to higher net operating profit".


Table: Aeoncr's last 8 quarterly results


Chart 1: Aeoncr's last 24 quarterly results

Indian Associate to start Operation

AEONCR has a 20% equity interest in AEON Credit Service India Private Limited (‘ACSI’). In February 2013, ACSI has obtained the license from the Reserve Bank of India to conduct Non-Banking Financial activities in India.

AEONCR is one of the three overseas bases for AEON Financial Co, of Japan. The other overseas bases are Thailand & Hong Kong. As an overseas base, AEONCR supports the Indonesian & Indian operations. The planned expansion into Turkey and Bangladesh will fall under the purview of the Malaysian base. It would be interesting to see whether AEONCR would have a small stake in the Turkey and/or Bangladeshi operation, like the Indian operation. AEONCR does not have any equity stake in the Indonesian operation. For more details of the AEON Financial Co's operation, go here. 

Valuation

AEONCR (at RM17.44 as at 11:00am) is now trading at a PE of 16.9 times (based on last 4 quarters' EPS of 103.50 sen). Despite the high PE ratio, AEONCR's PEG ratio is still attractive at 0.4 time (arrived at by dividing PE with average CAGR of 45%).


Technical Outlook

AEONCR is still in an uptrend. In a sharp correction, the 30-week SMA line would act as the support and may be a good point  of entry to the stock.


Chart 2: Aeoncr's weekly chart as at June 18, 2013_9.40am (Source: Quickcharts)
 
Conclusion

Based on satisfactory financial performance, attractive valuation & positive technical outlook, AEONCR is rated 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, AEONCR.

More interest on Interest Rate

One of the important drivers for real estate value is interest rate. The other important drivers would be income/economic growth & demographic. When US interest rate (represented by 10-year Treasury Bond yield) dropped from a high of 15% from early 1980s to a low of 1.5% in early 2013, US real estate index rose from 60 points in 1985 to 200 points in 2006. See Chart 1 & 2 below.


Chart 1: TNX price chart as at June 11, 2013 (Source: Yahoo Finance)


Chart 2: US Real Estate Index as at June 11, 2013 (Source: aboutinflation.com)

While the above charts are based on the US example, I believe the same also applies to other countries, such as Malaysia. When I first started working in the banking industry in late 1980s, housing loan interest rate was above 10%. Over the years, interest rate has dropped steadily to a low of 5% recently.

If interest rate regime changes from a declining trend to a rising trend, I believe the value of real estate would be capped initially and then reversed. This topping-out process would not be immediate and may play out over a few years duration- depending on the movement in interest rate.

I remember one exercise that we did when I was in the bank when we raised the installment amount on the housing loan customers due to increase in interest rate (brought on by increase in Base Lending Rate). Many of the customers struggled to meet their installment payment. The reason we raised the installment amount was because the amount received was not enough to cover the interest accrued on the loan. For example, a RM500,000 housing loan on a tenor of 30 years at an interest rate of 6% would call for monthly installment of RM2698. If interest rate rises to 8%, the installment amount would rise by RM604 (or, 22%) to RM3302. That amount can be very taxing for many borrowers and especially so for over-leveraged borrowers.

In an environment where investing or speculating in properties has been a sure-thing for so long, the danger of a disorderly clearing out is very real. This danger had prompted a Singapore Minister to caution the citizens of the republic of the impact of future interest rate hikes (here). If you think this is another example of Singapore kiasu mentality, think again. Yesterday, Indonesia raised its interest rate by 25 basis points to 6% (here).

Rubber Glove Manufacturers' Profit Margin tells a tale

In a picture, you can see that the profit margin for Topglov & Supermx is dropping, while the profit margin for Kossan & Harta is rising. In this cutthroat competitive environment that rubber glove manufacturers are operating, you must go with the winners. And, the winners are the ones that can raise their profit margin.


Chart: Rubber Glove Manufacturers' Profit Margin

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, Supermx, Kossan & Harta.

Topglov- Bottom-line slipped

Results Update

For QE31/5/2013, Topglov's net profit dropped by 20% q-o-q or 25% y-o-y to RM40 million while revenue inched higher by 5% q-o-q but remained unchanged y-o-y at RM604 million. The slight growth in revenue was the "result of expansion in demand and further improvement in efficiency from better utilization of production capacity". Bottom-line dropped due to decline in profit margin due mainly to "a more competitive pricing structure and the adverse movements in foreign exchange which resulted in the recognition of unrealized losses of RM10.9 million from value on its USD foreign exchange forward contracts and AUD fixed income investments. Compared to the preceding quarter, the unrealized loss amounted to RM1.4 million only".

Note: If the unrealized forex losses are excluded, Topglov's pre-tax profit still declined from RM62.8 million in QE31/1/2013 to RM54.3 million in QE31/5/2013- a drop of 13.5%.


Table: Topglov's last 8 quarterly results


Chart 1: Topglov's last 28 quarterly results

Valuation

Topglov (closed at RM6.35 yesterday) is now trading at a PE of 18.7 times (based on last 4 quarters' EPS of 34 sen). At this PE multiple, Topglov is overvalued.

Technical Outlook

Topglov has nearly revisited its high of RM6.88 in 2010. Its immediate resistance will be the horizontal line at RM6.80 & its support would be the horizontal line at RM5.60.


Chart 2: Topglov's weekly chart as at June 13, 2013 (Source: Quickcharts)

Conclusion

Based on demanding valuation & strong technical resistance, Topglov is rated SELL INTO STRENGTH.

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.

Further thought on our market

The sharp drop in FBMKLCI has prompted a few of my clients to pose the question- How bad can this correction be? From Chart 1 & 2 below, we can see that Hang Seng & Strait Times indices had corrected by 9-10% over the past 1 month. If FBMKLCI were to give back 10% from its recent high of 1790 (ignoring the high of the euphoric high of 1826 recorded on May 6), then our index may drop back to 1610. Shocking indeed!!

Note: Despite the sharp correction, both HSI and STI are still in a long-term uptrend line.


Chart 1: STI's daily chart as at June 12, 2013 (Source: Stockcharts)


Chart 2: HSI's daily chart as at June 12, 2013 (Source: Stockcharts)

Meanwhile, the two biggest economies- USA & Germany- are chucking along nicely and their main stock market barometers (S&P500 & DAX) are comfortably above their long-term uptrend line.


Chart 3: S&P500's daily chart as at June 12, 2013 (Source: Stockcharts)


Chart 4: DAX's daily chart as at June 12, 2013 (Source: Stockcharts)

This note serves to highlight the point that the market risk is always present. We may underestimate this risk, such as the downside risk in our market over the past 2 weeks or the upside risk in Hong Kong or Singapore, now (if these markets rebound from their respective long-term uptrend line).

Market Outlook as at June 13, 2013

FBMKLCI dropped sharply this morning. As at 10:00am, the index was down 16 points to 1759. The immediate support is at 1750 which is the medium-term uptrend line as well as the downside support of the previous expanding triangle. If the 1750 support is violated, the index may drop further to close the gap at 1720. Below that, the index should find good support at the psychological 1700 mark.


Chart: FBMKLCI's daily chart as at June 13, 2013_10.15m (Source: Quickcharts)

The sell-off in our market is a catch-up action after the steady sell-down seen in many equity markets. The widespread weakness in global equity markets has been attributed to the strengthening U.S. dollar on the back of rising yields, which in turn was brought on by improving U.S. economy data that prompted fear of an earlier-than-expected extraction from QE by Fed (aka Fed tapering). At the same time, China has been releasing weak economic data, leading to further sell-down in the commodity complex. 

Based on the above, we have to adopt a more prudent approach in the market for now.

NTPM- a consumer stock worth close tracking

Result Update

For QE31/1/2013, NTPM's net profit increased by 13% q-o-q but dropped by 4% y-o-y to RM13.8 million while revenue increased by 8% q-o-q or 10% y-o-y to RM128 million. The increase in revenue and profitability is mainly due to the contribution from sales of baby diapers.

(Note: NTPM will be announcing its results for QE30/4/2013 in the next few days.)


Table: NTPM's last 8 quarterly results


Chart 1: NTPM's last 30 quarterly results

New Investment in Vietnam

NTPM has incorporated a subsidiary, NTPM (Vietnam)  to undertake the business of manufacturing, processing tissue paper and products related to tissue paper and manufacturing semi-finished paper rolls. To carry on this business, NTPM has invested USD4.95 million to acquire a piece of land measuring 100,000 square meters in Vietnam Singapore industrial Park (“VSIP”) II in Binh Duong province, Vietnam.

Valuation

NTPM (closed at RM0.535 yesterday) is now trading  at a PE of 12.4 times (based on last 4 quarters' EPS of 4.3 sen). At this PE multiple, NTPM is deemed fairly valued.

Technical Outlook

NTPM has broken above its intermediate downtrend line at RM0.46 in March this year. In May, it broke above its horizontal resistance at RM0.49-0.50. With these breakouts, NTPM is expected to enter into its next upleg. See Chart 2 below.


Chart 2: NTPM's daily chart as at June 12, 2013_12.30pm (Source: Quickcharts)

From the monthly chart, we can see that NTPM may have established another long-term uptrend line (S-S1) after breaking below its earlier ling-term uptrend line (SS).


Chart 3: NTPM's weekly chart as at June 11, 2013 (Source: Tradesignum)

Conclusion

Based on improving financial performance, fair valuation & potentially positive technical outlook, NTPM could be a stock worth close tracking. If the result for QE30/4/2013 shows continued or further improvement, the stock could be 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, NTPM.

Astro- broke its uptrend line at RM3.00

The rollout of a new cable TV on June 9 by ABNxcess brought an end to Astro's recent rally. Today, astro broke its immediate uptrend line (SS) at RM3.00. With this breakdown, Astro is expected to slide further, possibly testing its longer term uptrend line (S1-S1) at RM2.75.

Based on the above, Astro is now rated a trading SELL.


Chart: Astro's daily chart as at June 12, 2013_12.30pm (Source: quickcharts)

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.

Yinson- growing up real fast

In the past two weeks, Yinson has captivated the interest of investors in a big way. It announced two big developments, namely the private placement to a strategic investor, Kencana Capital & the acquisition of a Norwegian company with exposure in the FPSO & FSO sectors. In the process, the share price rose from RM3.00 in late May to RM5.00 yesterday.

From the intra-day chart below, we can see the spectacular movement in Yinson's share price. However, a casual observer would immediately pick out one rather peculiar aspect of the price movement, which is that the share price seems to move ahead of the announcement. For example, Yinson rose from RM3.00 to nearly RM4.00 before the announcement of the private placement and again the share price moved from RM4.00 to nearly RM5.00 before the suspension prior to the announcement of the acquisition of the Norwegian company. Those in the know would have benefited substantially from the insider's knowledge- something the company should be concerned about.



Chart 1: Yinson's intra-day 30-min chart as at June 11, 2013 (Source: Quickcharts)

If you looked at the long-term monthly chart, you will see that the breakout above the RM3.20 mark in early June put Yinson in the all-time high territory. Undoubtedly, the Yinson of today is a very different animal from the Yinson of the past. The substantial change in the business may call in question the relevance of the chart as a tool to analyze the stock. I believe that the chart still plays a part in our analysis but we have to place less reliance on it & question whether the support & resistance levels established years ago would still operate as support or resistance.

Since Yinson is in all-time territory, the stock is in a very bullish mode. However, we should remember the old saying that lightnings seldom strike twice or thrice. After these two meaty announcements, Yinson would have to prove that it can execute. Before it can begin to execute, it must merge its nascent Oil & Gas division with the newly-acquired Norwegian business. This hard work is not as sexy as the M&A announcement but it is the foundation for justifying its market capitalization of RM1.05 billion today when its net profit for FYE31/12/2012 was only RM34 million (go here)- giving the stock a whopping trailing PE of 31 times. Can Yinson do the heavy lifting? Only time will tell.


Chart 2: Yinson's monthly chart as at June 11, 2013 (Source: Tradesignum)

As such, you must exercise careful discretion when trading or investing in Yinson. We must bear in mind that Kencana Capital (a private company of Mokhzani Mahathir) bought into Yinson at only RM2.82 apiece last week (thus sitting on a paper profit of RM60-70 million). Talk about good timing!

For more on Yinson, check out my previous posts here & here.

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, Yinson.

PRKCORP- an interesting property & infrastructure stock

PRKCORP is a profitable medium-size developer based in Perak. It is involved in the development of a township called Bandar Meru Raya (here). In addition, PRKCORP is involved in the development of an industrial park measuring 1000 acres known as Lumut Port Industrial Park as well as having stake in the Lumut Maritime Terminal & Lekir Bulk Terminal. For more on the infrastructure development, go here.

For FYE31/12/2012, it reported a net profit of RM38 million on a revenue of RM155 million. This is an improvement from a net profit of RM30 million on a revenue of RM129 million recorded in FYE31/12/2011. For 1Q2013, it chalked up a net profit of RM6.8 million on a revenue of RM32 million. Based on its EPS of 6.8 sen for 1Q2013, PRKCORP's full-year EPS for FY2013 is estimated to be about 27.2 sen. At the current price of RM2.58, PRKCORP is trading at a PE of 9.5 times.

From the chart below, we can see that PRKCORP has broken above the line connecting the peaks for the past 10 years. With this breakout, the share price may rally to a high of RM4.00-5.00.

Based on technical consideration, PRKCORP could be a good medium-term investment or even a good trading BUY.


Chart: PRKCORP's monthly chart as at May 7, 2013 (Source: Tradesignum)

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, PRKCORP.

LPI- Uptrend may accelerate

We have looked at LPI a few times before this. The stock's gradual uptrend may accelerate after the share price broke above the line connecting its previous peaks at RM15.00. Its likely target for a medium-term rally could be RM17.50-18.00. For more on LPI, go here.


Chart: LPI's weekly chart as at May 10, 2013_12.00pm (Source: Quickcharts)
 
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, LPI.

Market Outlook as at June 6, 2013

A quick look at the charts for FBMKLCI, FBM70 & FBMScap reveals that our stock market is likely to consolidate for the near term. We can see that FBMKLCI  has start to correct earlier while FBMScap shows little sign of weakening. This apparent strength in second & third-liner stocks can be deceiving as its indicators - like those of FBMKLCI & FBM70 - have all turned down.


Chart 1: FBMKLCI's daily chart as at june 6, 2013_4.45pm (Source: Quickcharts)


Chart 2: FBM70's daily chart as at june 6, 2013_4.45pm (Source: Quickcharts)


Chart 2: FBMScap's daily chart as at june 6, 2013_4.45pm (Source: Quickcharts)

US stock markets- a short breather or a long pause?

US stock markets have been rather volatile of late. You can see that DJIA hae just broken below its intermediate uptrend line while S&P500 is resting on its intermediate uptrend line. Unless a strong rebound kicks in, US stock markets look set to consolidate for the next few weeks.


Chart 1: DJIA's daily chart as at June 5, 2013 (Source: Stockcharts)


Chart 2: S&P500's daily chart as at June 5, 2013 (Source: Stockcharts)

Meanwhile, Nikkei broke its intermediate uptrend line at 13500 three days ago. If the US stock markets cannot stage a strong rebound soon, I expect global equity markets to take a breather for the next few weeks. The same scenario will pan out in our local market.


Chart 3: Nikkei's daily chart as at June 5, 2013 (Source: Stockcharts)

Based on the above, we should avoid taking large long position in the market for the short term.

Scomies or Scomien or Scomi?

In the past few days, Scomies [in full, Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd)] has been rallying. It broke above its horizontal resistance at RM0.42 and it soared nearly 80% to close at RM0.755 this morning.


Chart 1: Scomies's weekly chart as at June 6, 2013_12.30pm (Source: Quickcharts)

Would this play spill over to its sister company, Scomien which is involved in the provision of solutions for the transportation industry, ranging from monorail systems, buses and special purpose vehicles. With the government considering another 2 MRT lines (in addition to the maiden Sungai Buloh-Kajang MRT project), Scomien may get involved in a domestic project where the margin may be more attractive. Scomien may be breaking above its long-term downtrend line at RM0.50.

Chart 2: Scomien's weekly chart as at June 6, 2013_12.30pm (Source: Quickcharts)

Finally... what about the parent company, Scomi? IJM has bought into this company with the hope of getting into the Oil & Gas business and possibly the transport engineering business. If Scomi can surpass the recent high at RM0.44, we may see a decent rally to RM0.56 & then to RM0.71.


Chart 3: Scomi's weekly chart as at June 6, 2013_12.30pm (Source: Quickcharts)

Between these three stocks, my preference is for Scomi.

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, Scomi, Scomies & Scomien.

CCM- top-line & bottom-line continued to slide

Result Update

For QE31/3/2013, CCM's net profit dropped 76% q-o-q or 35% y-o-y to RM4.4 million while revenue dropped 24% q-o-q or 19% y-o-y to RM288 million. Revenue dropped q-o-q due to lower revenue contribution from the Chemicals and Fertilizers Divisions. Pre-tax profit decreased by 41% q-o-q due to lower profit contribution from all the Divisions. In addition, the preceding quarter’s profit before tax included an amount of RM7.4 million as fair value change on investment properties.


Table: CCM's last 8 quarterly results


Chart 1: CCM's last 29 quarterly results

Valuation

CCM (closed at RM1.22 last Friday) is now trading at a PE of 15 times (based on last 4 quarters' EPS of 8.2 sen). For a company with continuous deterioration in its earning, CCM does not deserve a PE of 15 times.

Technical Outlook

CCM is still in a downtrend line, with resistance at RM1.20-1.25. Its immediate support is at the horizontal line at RM1.10.


Chart 2: CCM's weekly chart as at May 31, 2013 (Source: Quickcharts)

Conclusion

Based on challenging operating environment, unexciting financial performance, demanding valuation & negative technical outlook, CCM is rated at a SELL.

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, CCM.