FBM-KLCI has risen steadily from its low of 1250 at the end of May to touch an intra-day high of 1503 yesterday. The powerful liquidity-driven rally is experiencing some profit-taking today. From the chart below, we can see bearish divergence in some indicators which signaled underlying weakness in the market.
The current correction may bring the index down to the horizontal line 1480, which was September high. In addition, I drew the immediate uptrend line ('SS') which connects the troughs since May. Two 'parallel' lines were also drawn- one marking the upper boundary while the second line delineating the mid-point. This second line should also provide some support to the index at 1480 level in the current correction. All in all, I believe the developing correction to be healthy & the 1480 level should be a good entry level to the market.
Chart: FBM-KLCI's dail chart as at Oct 15, 2010_10.30am (Source: Quickcharts)
42 comments:
Hi alex, what's your opinion for BKAWAN? from his 40% stack of KLK, it seem to be undervalue compare to his current price.
Hi Alex,
Wht's yr thoughts on ytl-e?
Care to share if it's a good time to buy more or sell to take profit?
Tq.
Good day Alex,
Can u provide some insights on MKLAND?
Dear Alex,
What's your comment on ICAP?
Its current NAV is 2.45 and current price is 2.00. I found that its last year's profit was not good, even with one quarter of big loss. I've no idea how an investment company's PE should be like. It's now trading at PE 7.6 for last 4 quarters EPS. But looking at its per quarter profit, they have huge differences. So, I am confused and not sure how to judge.
Thanks!
Hi Alex, would like to hear your point of view on Uzma.
Thanks
Hi Harry,
The story of Bkawan as an undervalued stock is not a new story. It's well-known & yet the stock has traded at this huge discount for many years. The question is why is it different now. We can see the same rationale why investors are buying into QSR instead of KFC because QSR represents a cheaper exposure to KFC. However, we discover now Kulim, the parent of QSR is reducing its stake in QSR & instead it's buying more shares in KFC! I can only say that at this point of the market, investors are receptive to any investment idea.
Despite the above observation, I must admit that Bkawan's rally may have legs from the technical perspective. The stock has surpassed its all-time at RM13 recorded in January 2008. The stock then dropped to RM6.00in October 2008- a decline of RM7.00. To extrapolate the "possible" target of the current move, we need only to add the lost ground of RM7.00 to the breakout level of RM13.00. We would arrive at a target price of RM20.00. Sound too high to be true but who can argue with a Wall of Liquidity!
Hi Seong Wai
I have just advised my client to hold onto her YTL-e on Oct 14. While I am very skeptical about the prospect of its WIMAX venture, the stock is quite exciting from the technical perspective. It broke above its all-time high at RM1.00 recorded in 2007. The stock then dropped to RM0.18 in October 2008- a decline of about RM0.80. To extrapolate the "possible" target of the current move, we need only to add the lost ground of RM0.80 to the breakout level of RM1.00 and arrive at a target price of RM1.80.
Hi solomon
I don't know the latest development in MKLAND. I can only give you the technical perspective, which is not very exciting. The stock is still in a downtrend with the breakout level at either RM0.36 or RM0.43 (depending on how the downtrend line is drawn). Indicators are neutral.
Hi steve
The best approach to value an investment vehicle, such as a close-end fund (eg. ICAP) is to use the net asset value ('NAV') of the fund.
The problem with close-end funds & ETFs is their market price does not track their NAV, unlike mutual funds. However, if the fund manager can use its available reserves to buy (or, sell) its units whenever the market price diverge too far from the NAV, then this problem should not be too serious. I am not sure whether they can do so in Malaysia.
One extreme example was the CIMB (then, known as Commerce Asset-Holding Berhad)'s privatization of its listed REIT, First Malaysia Property Trust at a price of RM0.62 per unit while its NAV was then at about RM0.88 per unit. For more, go here .
Hi jeremy tan
I am not familiar with Uzma. It seems to be an unexciting O&G company, incurring losses for the past 4 quarters.
I can only give you the technical perspective. Since its listing in August 2008, this stock has been range-bound between RM1.25 & RM1.90. For now, its immediate support is at RM1.40 while the resistance from the medium-term downtrend line & the horizontal line is at RM1.60. The indicators (such as MACD & DMI) have turned up slightly, which could be a sign that the stock may move higher. Let's wait & see.
Hi Alex,
What is your opinion on KNM and SAAG? Recently SAAG announce a 2-call right while there has been some accumulation by a foreign fund in KNM although EPF continue to dump them.
Hi William
I am neutral on KNM but bearish on SAAG. KNM's financial performance has been disappointing. For 1H2010 ended 30/6/2010, its net profit dropped 68% y-o-y from RM169.9 million to RM54.5 million on the back of a 22%-decline in turnover from RM965 million to RM757 million. The real reason for the decline in KNM's share price is a proposal to amalgamate its share capital. This, being the reverse of a share split, will do the opposite of a share split- depressing the share price. After this fruitless exercise, the share price should reflect its fair value which I believe to be higher than the current price of RM0.49.
Like KNM, SAAG has been a poor performer for the past few quarters, with small losses incurred on & off. Based on its accounts as at 30/6/2010, it has heavy borrowings of RM760 million. A big portion of its funds was used to finance its Receivables & Amounts due from Contract Works done totaling RM608 million. This is disproportionately bigger than its 1H2010 turnover of RM55 million and raises doubt as to its quality or the timeliness of collection. SAAG has also recently proposed a very large capital-raising exercise ( here ). I think it is best to avoid this stock.
thanks alex.
I have noticed a volume buildup for DUTALAND, are you excited about its prospect?
Hi Alex
The price of bstead have go up recently. Do u think it will go up more? what is the new tp? Thanks
Hi Alex,
Could you kindly explain the meaning of retained earnings and the purpose of it?What about positive reserves and negative reserves?What are their implications when read as a whole?Thank you in advance.
Hi Alex,
How much you think Liondiv and CCK can goes base on forecast on the coming Q ?
Pls advise. TW
hi bro. can u comment on KUCHAI ? KUCHAI quite similar to BKAWAN, asset rich stock which trade at huge discount. Thx alots.
Hi solomon
DUTALAND broke above the downtrend line that stretches back to June 2009. The breakout was at RM0.45.
Its immediate support is at RM0.52 & then at RM0.48. Immediate resistance at RM0.55-0.56 and then at RM0.60-0.62. Further resistance levels are at RM0.70 & RM0.80.
A breakout above a downtrend line is always a good trading proposition.
Hi nightradersdk
Bstead broke above its strong horizontal line at RM4.00 in August. Since then it has broken through 3 more strong resistance levels at RM4.40, RM4.60 & RM5.00. It's now taking a short breather after testing unsuccessfully the resistance at RM5.40. Below that, it would encounter resistance at RM5.70 & possibly the all-time high at RM6.00.
How far Bstead can go would depend on the price movement of CPO and the jobs secured by BHIC.
Hi newbie
You have asked a very broad topic- retained earnings & its implication. If you were a company, your saving would be the company's retained profit. As an individual, the more you saved, the less you consumed. The more you saved, the more you have available to invest in shares or houses. If you do it right, the faster you would become financially independent.
However, the lesser that you spend, the poorer you would look & the more miserable you would feel. Your friends might abandon you. Like many things in life, moderation is important.
You may find more on retained earning from books on financial management, etc. These books should be able to explain this subject better than me.
Hi cheer
I have no forecast on the upcoming results of Liondiv and CCK. Let's wait & see.
Thanks Alex for the effort in explaining.
Hi wong
For investors to "migrate" from the target company to the parent company, the price of the parent company must be very attractive. To qualify as an attractive proposition, the market capitalization of the parent company must be nearly equivalent to the value of its shareholding in the target company. An investor would then accept the parent company as an alternative- a cheaper but not an inferior alternative- to the target company. In fact, the market tends to undervalue the parent company- giving value only to the more famous subsidiary or associate & ignore the other businesses owned.
In your example, the questions to ask are:
1. What is Kuchai an alternative to? If you need to ask that question, then you know there is a problem. The case of BKawan-KLK or QSR-KFC is so well-known that they need no further explanation. For the info of other readers, Kuchai owns 26% in Sg Bagan. However, Kuchai is in turn owned partially by Kluang (42%) & Sg Bagan (9%).
2. What is the value proposition to switch to Kuchai instead of investing in Sg Bagan? Sg Bagan has a market capitalization of about RM165 million. Kuchai's 26%-stake in Sg Bagan is worth RM43 million. Kuchai's market capitalization is about RM119 million. Based on this, Kuchai is not a very exciting alternative. For that matter, I don't find Sg Bagan a very exciting stock.
Based on this, I don't think Kuchai is an exciting prospect.
bro alex. while i waiting ur reply on KUCHAI, its share price all the way up. hope u can comment on it asap. thx.
hi alex. u forget to include 3m shares of Great Eastern Singapore (traded now btw S$15-16) in Kuchai asset le.
thank you for your reply, you are real kind and willing to share your opinions/knowledge. Appreciate it.
Dear Alex,
With the recent pronouncement on Kbunai 3115 in Budget 2011, would like to hear your view on this stock as it seems has turned it from a low-key counter to an aggresive/potential value stock.
Any TP/ entry price for this stock?
Thank you.Good day.
HI Alex
TQ for the comment on the Liondiv and CCK. Any stock you have the forecast on hand?
Hi wong
Kuchai's investment in quoted shares are stated at fair value (see Note 13 of the Annual Report for FY2009). For the Annual Report, go here . As at 30/6/2009, the value of quoted overseas shares was RM97 million.
Technically speaking, Kuchai is poised to break above its strong horizontal resistance at RM0.90. Its next resistance levels are RM1.00 & RM1.20.
Good luck.
Hi Layman
As per this report from BTimes :
"... Karambunai... will build an integrated eco-tourism resort (IR) in Kota Kinabalu, Sabah, for over RM3 billion. (For this), the government will allocate RM100 million to part-finance the development".
The positive for the company is the subsidy of RM100 million, which is equivalent to 3.33% of the total project cost of RM3.0 billion. The question to ponder is whether the project is feasible.
In the real world, if a project is feasible, it would have been implemented long ago. If it is not feasible, you need a lot of help from the government, such as cheap loans, tax breaks & subsidies. What Karambunai is getting is relatively small and I don't think it would make a difference on the success or failure of this project. The project still entails a lot of risk for Karambunai.
Hi Alex,
Southern Acids spiked today with decent volume.
Not sure if its a one day show or got more to go...
Any thoughts ?
Tq
Lbs just had a bullish breakout. Any comments on it, thanks Alex : )
Dear Alex,
May I know your comments on CSCSteel?
Thanks!
Dear Alex,
After the Budget 2011, the the Gamuda share price is droping. May I know your comments on Gamuda in short term & long term?
Thanks!
Hi Richard
Sorry for the late reply.
Southern Acids ('SAB') broke above two strong resistance levels. They are:
1) horizontal line at RM1.80-1.82 on Oct 11; and
2) re-listing high at RM2.00-2.08 on Oct 19-20.
If you want to get into this stock, you may try at either:
1) RM2.07 based on a 50%-pullback (of the rally from RM1.82 to present intra-day high of RM2.32); or
2) RM2.13 based on a 33%-pullback.
Hi jeremy tan
You were spot on- LBS did have a bullish breakout at RM0.58 on Oct 19. It even broke above the horizontal line of RM0.62 yesterday & tested the next horizontal resistance at RM0.67-68 this morning. It's now experiencing some correction. Can the resistance-turned-support at RM0.62 hold? Let's wait & see.
Hi steve
CSCSteel is in an uptrend line with support at RM1.77. Its upside is capped by a 'horizontal' line at RM1.85.
CSCSteel recorded a net profit of RM62.2 mil on turnover of RM583.3 mil for 1H2010. Annualized EPS for FY2010 would be 34 sen. This compared favorably to FY2009 was at 24 sen. Based on current price of RM1.80, CSCSteel is trading at an attractive PE of 5.3 times.
Hi Tee
Gamuda is likely to drift lower over the next few weeks until it can find support at the accelerated uptrend line at RM3.70. If this level is broken, the next support would be at the horizontal lines between RM3.50-3.60 which coincides with the 100-day SMA line. If Gamuda were to break below the RM3.50-3.60 support level, then the stock could drift for 6-9 months until it test its long-term support at RM3.20. I would rate the last scenario as not likely under the current circumstances.
Alex,
Many thanks.
hi alex,
i like QSR because of its dominance in the fast food business. i noticed the share price has gone up quite a bit recently. what is your opinion on its short and long term outlook? if i plan to get in, at what price should i get in base on your analysis? Tq
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