E&O's next upleg may have started

Background

On April 12, E&O announced that it has secured the In-principle approval to reclaim an additional 740 acres of land off Tanjung Tokong for the continued development of its successful Seri Tanjung Pinang project (here). This approval was very timely for the holders of E&O-wa which will expire on May 15. In fact, this warrant has ceased trading today (here).

From Chart 1 below, we can see the selldown of E&O-wa a few weeks prior to the above announcement. After the announcement, the share price & the price of the warrant rebounded. In fact, we can see strong buying over the past two weeks as the warrant would provide a slightly cheaper entry to the share if one were to buy it & convert to share instead of a direct buying of the share. This is a pretty bullish sign which means that E&O could see more buying in the near term.


Chart 1: E&O-wa's daily chart as at April 27, 2011 (Source: Quickcharts)

Technical Outlook

Interestingly, the share has rallied today & it broke above the horizontal line (as well as its recent high) of RM1.38. If this breakout can sustain, then the share may soon test its next resistance at the horizontal line RM1.50. See the daily & weekly charts below.


Chart 2: E&O's daily chart as at April 28, 2011_11.00am (Source: Quickcharts)


Chart 3: E&O's weekly chart as at April 28, 2011_11.00am (Source: Quickcharts)

Conclusion

Based on the bullish technical breakout & the strong buying of the warrant just prior to its expiry, I expect E&O could enjoy an exciting time ahead. As such, E&O could be a good trading BUY.

HPI & MAA broke their horizontal support

This morning, one of the top performer for the past 2 months- HPI- took a sharp plunge. It opened at RM3.62, a gap down when compared to yesterday's closing price of RM3.67. It continued to slide & broke below the horizontal support of RM3.40-3.43. This surprising bearish market action followed the announcement of a good set of financial results for QE28/2/2011 on April 22nd.


Chart 1: HPI's daily chart as at April 26, 2011_12.00pm (Source: Quickcharts)

The market action seen in HPI was also played out in another stock, MAA which broke its horizontal support at RM1.28 yesterday. That bearish breakdown was followed by further sell-off today. Like HPI, MAA will have to recover quickly above the violated horizontal support (which is now the resistance to overcome). Failure to do so would lead to more sell-off and possibly the end of the bull rally for both stocks.


Chart 2: MAA's daily chart as at April 25, 2011 (Source: Tradesignum)

based on the above, we should avoid HPI & MAA for now.

YTL- having the cake & eating it too

YTL has gone past its entitlement date for 1-to-5 share split. Below, I have appended the unadjusted price chart for the stock up to 9.20am this morning. Except for the share split, there was no announcement of any positive news that could explain the jump in the share price. Nevertheless, the share price made a high of RM1.75, which is equivalent to RM8.75 (prior to the share split). Even at the current price of RM1.67 (as at 9.38am), the price jump is unsustainable. The exchange has posted the reference price of RM1.59 for market guidance. This reference price (or, the theoretical ex-entitlement price) was arrived at by dividing the closing price yesterday of RM7.95 by the factor of 5. Unless there is positive development yet to be announced, YTL share price is likely to retrace back to the reference price over the next few days. A drop below the reference price cannot be ruled out as YTL had a sharp rally ahead of the share split.

Based on the above, I would recommend readers to avoid YTL. For those holding the stock, you may want to do a trading SELL at this point of time.


Chart: YTL's daily chart as at April 26, 2011_9.20am (Source: Quickcharts)

CBIP's uptrend to continue

Background

CB Industrial Product Holding Bhd ('CBIP') is involved in the manufacture and sales of palm oil mill equipment and related spare parts. It is also involved in the cultivation of oil palm, and production of crude palm oil and palm kernel. Its oil palm estates are quite sizable, with total land area of 44059 hectares. Of this, the planted area is about 29814 hectares. After discounting for minority interest, the Group's effective share of planted area is about 15877 hectares. See the table below. For more, go (here).


Table 1: CBIP's oil palm estates

Corporate Exercise pending

CBIP has just announced a generous bonus issue of 1-for-1 today, which caused a jump in the share price. This is in addition to the dividend in specie where the date of entitlement is on April 27 where CBIP will distribute its Treasury shares to its shareholders on the basis of 1-for-20.

Recent Financial Results

For QE31/12/2010, CBIP's net profit dropped 4.4% q-o-q while turnover increased by 37%. The company attributes the "lower profit in the current quarter ... to higher allowance for doubtful receivables recognized during the quarter. In addition, a gain on disposal of property during the immediate preceding quarter also had resulted higher profit for the quarter". On the other hand, net profit jumped 68.4% y-o-y on the back of a 55%-jump in turnover.


Table 2: CBIP's last 8 quarterly results



Chart 1: CBIP's last 16 quarterly results

Financial Position

CBIP's financial position is deemed satisfactory as at 31/12/2010. Its current ratio stood at 1.31 times while debts to equity stood at 0.46 time.

Valuation

CBIP (at RM4.32 as at 12.00 noon today) is now trading at a PE of 8.2 times (based on last 4 quarters' EPS of 53.02 sen). At this multiple, CBIP is deemed fairly attractive when compared to plantation stocks such as KLK, IOI & UMcca which are all trading at PE of 18 times. I do not think that CBIP should be subject to a hefty discount because it has a sizable engineering division. This is especially so as the plantation division has outgrown the engineering division. See the table below.


Table 2: CBIP's segmental report for FY2010

Technical Outlook

CBIP rallied on the announcement of the bonus issue today. From Chart 2, we can see that the stock has broken above its medium-term downtrend line at RM4.10. Its immediate resistance is the horizontal line at RM4.40. See Chart 3 below.


Chart 2: CBIP's daily chart as at April 21, 2011 (Source: Quickcharts)



Chart 3: CBIP's weekly chart as at April 21, 2011 (Source: Quickcharts)

Conclusion

Based on good financial performance & financial position, attractive valuation & positive technical outlook, CBIP could be a trading BUY as well as a medium-term investment stock.

AEONCr- ready for big time?

Background

AEON Credit Service (M) Bhd ("AEONCr") is involved in the provision of personal financing schemes, easy payment schemes and credit cards. For more, go here.

Recent Corporate Development

In March AEONCr has set up a subsidiary in India which will involve in the same business. The establishment of this new company is a precursor to AEONCr's expansion plan in Asia. For more, go here.

Recent Financial Results

Based on the latest results for QE20/2/2011, AEONCr's financial performance is deemed satisfactory. Its top-line & bottom-line have both increased steadily over the past 3 quarters.


Table 1: AEONCr's last 8 quarterly results



Chart 1: AEONCr's last 15 quarterly results

Financial Position

As at 20/2/2011, EONCr's current ratio is satisfactory at 2.51 times. While debts to equity ratio appears high at 2.95 times, AEONCr should not be measured in the same matrix as a normal trading or manufacturing company. It is a financial services company which needs to leverage to earn a decent return. A good comparison would be RCECap which has a debt to equity ratio of 2.84 times as at 31/12/2010. Based on this, I believe AEONCr's financial position as at 20/2/2011 is deemed acceptable.

Valuation

AEONCr (closed at RM4.10 yesterday) is trading at a PE of 7.8 times (based on last 4 quarters' EPS of 52.86 sen). This PE multiple appears high when compared to the PE of RCECap of about 3.5 times only. However, AEONCr may duplicate its success in Malaysia by setting up similar operation in other part of Asia. The first such set-up will be in India.

Technical Outlook

AEONCr may have broken above its downtrend line at RM3.90 on April 12. Since then, AEONCr has broken above the strong horizontal resistance at RM3.97-3.99 as well as tested its recent high of RM4.14. If AEONCr can break above the horizontal resistance at RM4.14-4.16, the stock could commence on its next upleg. Failure to do could lead to a mild correction akin to the formation of the 'handle' in a chart pattern called the 'cup with handle'. Subsequent upside breakout above the RM4.14-4.16 would lead to a bullish breakout that would be good for trading BUY.



Chart 2: AEONCr's weekly chart as at April 19, 2011 (Source: Quickcharts)

Conclusion

Based on good financial performance & fairly positive technical outlook, AEONCr could be a good stock for medium-term investment. While its valuation is less attractive than RCECap, this could be justified by its close tie with its parent company, AEON (one of my largest departmental store cum supermarket) and its exciting plan to expansion to the rest of Asia.

Hapseng- time to take profit

Hapseng broke below its string horizontal support of RM6.00-6.06 on April 12. Two days on, Hapseng has yet to recover above the support-turned-resistance. Its next strong support would be the 2007 high of RM4.00. Based on this bearish breakdown, Hapseng is a SELL.


Chart 1: Hapseng's daily chart as at April 14, 2011_11.00am (Source: Quickcharts)



Chart 2: Hapseng's weekly chart as at April 13, 2011 (Source: Tradesignum)

Some investors may still be excited about this stock as it has proposed a corporate exercise involving bonus issue as well as rights issue (with warrant). However, I believe that the main reason for the sharp price run-up in late 2010 was the rumor of a privatization of the company. I believe the idea of privatization (if ever there was one) may have been shelved due to the sharp price run-up. I based my belief on the fact that the company has proposed a bonus issue- something which you wouldn't undertake if you are seriously contemplating a privatization as bonus issues tend to price positive.

Market Outlook as at April 12, 2011

What a difference a day made! A spring shower has turned into a thunderstorm! The FBM-KLCI broke through the 10 and 20-day SMA line like knife cutting through butter. More importantly, the FBM-KLCI has again broken below its long-term uptrend line support at 1540. With this bearish technical breakdown, we are again staring at the prospect of a market which may have peaked & the scenario of choppy trading or worse still, more downside ahead.

The immediate support for the index would be the 50 & 100-day SMA line at 1518-1520. Thereafter, the index may find support at the psychological 1500 level & finally the strong horizontal support at 1475. In my book, a break below 1475 would be the start of a bear market.


Chart 1: FBM-KLCI's daily chart as at April 11, 2011 (Source: Tradesignum)

I have appended the weekly chart for FBM-KLCI to show the similarities & differences between the current market & the market top in 2008. Is the market tracing out a top?


Chart: FBM-KLCI's weekly chart as at April 12, 2011_3.00pm (Source: Quickcharts)

In view of the bearish breakdown noted above, we should stay sideline for now.

Market Outlook as at April 11, 2011

Our market has entered into a correction, with FBM-KLCI pulling back towards the 10-day SMA line at 1546. If this line is violated, the next support would be the 20-day SMA line at 1535. This is the most severe correction since the market recovered from its 3 months' consolidation (from January to March). In that recovery, the FBM-KLCI rallied from a low of 1476 on March 15 to hit a high of 1565 on April 4. If the current correction leads to a retracement of 38% of the recent gain of 89 points, then the FBM-KLCI may decline to 1531. That's quite close to the 20-day SMA line. I think the 1530-1535 level would be the likely downside limit for the current correction.


Chart: FBM-KLCI's daily chart as at April 11, 2011_10.00am (Source: Quickcharts)

CPO has broken above its downtrend- line

CPO broke above its downtrend line (RR) at RM3420 on last Friday. With this upside breakout, CPO's downtrend is over and it may commence in its next upleg soon.


Chart: CPO's weeky chart as at Feb 17, 2011 (source: ifs.marketcenter.com)

Based on the positive technical outlook for CPO, we should increase our position in the Plantation sector. My preference is for stocks that are presently trading within the band of RM2.00 to RM3.00. These include TDM, RSawit, HSPlant, IJMPlant, KMLoong & SWKPlant.

Carlsbg- time to take profit

Early Comment recapped

In November 2010, I posted a piece on Carlsbg, where I concluded that the stock was trading at its fair value & has limited upside. To wit:

Carlsbg is deemed fairly valued. If it can trade at the same multiple of 16.4 times as Guinness Anchor Bhd- a more established company- then Carlsbg may go as high as RM6.56. At this moment, I do not think Carlsbg can command that kind of valuation. As such, I think its upside is rather limited.

Subsequent Financial Results

Carlsbg announced its results for QE31/12/2010 on February 24. I did not post any update because there was nothing significant to comment. If I had posted anything, it would have been a negative comment as its top-line & bottom-line had declined in the last quarter of a calender year, which is normally a good quarter. However, Carlsbg has undergone some restructuring after acquiring its related company in Singapore which could lead to some distortion in its accounting numbers. All in all, Carlsbg's financial results after its acquisition of the Singapore entity (completed in October 2009) was underwhelming. See Table 1 & Chart 1 below.


Table 1: Carlsbg's last 8 quarterly results



Chart 1: Carlsbg's last 21 quarterly results

Special Dividend announced

On February 24, Carlsbg made a surprise announcement. It would be paying out a special dividend of 43 sen for FY2010 (on top of the final dividend of 7.5 sen). Since that announcement, the share price has rallied. Given the additional borrowings of RM44 million incurred for FY2010, I believe the chance of another huge special dividend for FY2011 is low.

Valuation

Carlsbg (closed at RM7.83 yesterday) is now trading at a PE of 17.8 times (based on last 4 quarters' EPS of 44 sen). This multiple is higher than the PE multiple enjoyed by GAB (of 16.4 times). The only justification is that Carlsbg has a dividend yield of 7.5%. However, this dividend yield includes a special dividend which I believe may not be repeated (or, if repeated, it would not be so sizable). As such, I believe Carlsbg is overvalued.


Table 2: Carlsbg & GAB's valuation compared

Technical Outlook

From Chart 2 below, we can see the upside breakout above the horizontal line of RM6.50 in February (following the announcement of the special dividend). The rally was so strong that Carlsbg has matched its all-time high of RM8.00 (recorded in 1993) this morning. See Chart 3 below.


Chart 2: Carlsbg's daily chart as at April 8, 2011_10.00am (Source: Quickcharts)


Chart 3: Carlsbg's monthly chart as at April 1, 2011 (Source: Tradesignum)

The monthly chart of GAB is also included for your perusal.


Chart 4: GAB's monthly chart as at April 1, 2011 (Source: Tradesignum)

Conclusion

Based on the above- unexciting financial performance, high valuation & strong technical resistance, I believe Carlsbg is a SELL now.

Gtronic has a bullish breakout

Technical Analysis

Gtronic has broken above its downtrend line at RM1.10-1.12 yesterday. If this breakout can recruit sufficient buying interest, we may see the beginning of an uptrend for the stock. Its immeidate resistance is the horizontal line RM1.18 & then RM1.25.


Chart 1: Gtronic's daily chart as at April 7, 2011 (Source: Quickcharts)

Recent Financial Results

Gtronic's top-line & bottom-line took a dip in QE31/12/2010 (which happened to Unisem as well).


Table 1: Gtronic's last 8 quarterly results



Chart 1: Gtronic's last 16 quarterly results

Valuation

When compared to the other 2 big semicon players in the market, Gtronic has the highest PE (10.2 times) but it gives the highest dividend yield (5.9%).


Table 2: Gtronic, MPI & Unisem's valuation compared

Conclusion

Based on technical consideration, Gtronic could be a good trading BUY.

MHB may have a bullish breakout

MHB may have a bullish breakout above its rising wedge at RM7.00-7.05 today. While this breakout could be a good trading BUY, I would suggest a cautious approach. I am not entirely convinced of the breakout as it happened on relatively thin volume & came rather late in the afternoon (at precisely 4.15pm). Sudden sharp rise among GLC stocks in the late afternoon tends to be instituted by local funds for the purpose of supporting market indices. Watch the stock closely tomorrow for signs that this is not a flash in the pan. If the price is still firm for the first 2 hours tomorrow & the volume is significantly higher, this trading BUY has a good chance of success.


Chart: MHB's daily chart as at April 6, 2011(Source: Quickcharts)

As always, you can look through the table of CWs below & ride this trade via a cheaper instrument. My preference is for MHB-CB & MHB-CC.


Table: MHB's CWs' terms & valuation

General insurance companies rallied!

As part of BNM's plan to de-tariff motor insurance by 2016, motor insurance tariffs will be gradually revised upward from Jan 1, 2012. For more, go here & here.

Since the announcement, we have seen a steady rise in the share prices of a few weaker insurance companies, such as MAA, Kurasia & P&O. While Kurasia & P&O are general insurance companies, MAA is a composite insurance company. MAA has been rising very strongly since April 1 (no joke!)- jumping from less than RM0.80 to RM1.20 today. Now it seems that it may be selling of 70% of its composite insurance subsidiary, Malaysian Assurance Alliance to Zurich Insurance Co Ltd for RM1.2 billion. For more, go (here).

From the chart below, we can see that MAA broke above the "Cup with handle" formation at RM0.90 level on April 1 and rallied strongly. Today, it closed at the horizontal resistance-turned-support line of RM1.20. Its next resistance would be the horizontal line at RM1.40 (see Chart 1 below). If it can break above the RM1.40 level. it may test the long-term downward channel at RM2.00 (see Chart 2).


Chart 1: MAA's daily chart as at April 6, 2011 (Source: Quickcharts)



Chart 2: MAA's weekly chart as at April 4, 2011 (Source: Tradesignum)

Kurasia has yet to break above its long-term downtrend line at RM0.50. Its immediate support is at RM0.45.


Chart 3: Kurasia's weekly chart as at April 4, 2011 (Source: Tradesignum)

The technical outlook for P&O is better than Kurasia. It has broken above the downtrend line at RM0.80 on April 1. Its immediate support is the horizontal line at RM0.88 & the immediate resistance is at the horizontal line at RM0.93.


Chart 4: P&O's daily chart as at April 6, 2011 (Source: Quickcharts)

Based on the above, MAA & P&O are the stocks that are potentially tradable. My preference would be for P&O due to the bullish technical breakout. While MAA has also achieved a bullish breakout, it has gone up too much & could be due for some correction.

BJCorp may enter its next upleg

The Berjaya group has seen a few of its subsidiaries listed over the past 1 year and these newly-listed entities have done very well. They are BJRTail & BJFood. BJAsset, another company in the group has also risen smartly over the past 1 year. I believe it is time for the holding company, BJCorp to return to the lime light after 6-8 months of consolidation.

A look at BJCorp's chart below will reveal that the stock underwent a false breakout, followed by shakeout and finally a true breakout in the build-up to the previous rally in 2010. If this pattern is repeated, then BJCorp is on the verge of a true breakout. To achieve that, it needs to surpass the immediate downtrend line (R2-R2a) at RM1.15. As at 10.00 am, BJCorp did break above this resistance. Based on the upside breakout of the downtrend line, I believe BJCorp could be a good trading BUY.


Chart: BJCorp's daily chart as at April 6, 2011_10.15am (Source: Quickcharts)

MPHB may continue with its prior uptrend

MPHB broke above its medium-term downtrend line at RM2.69-2.70 this morning. With this breakout, MPHB could potentially touch the psychological level of RM3.00. As such, it could be a good trading BUY.


Chart: MPHB's daily chart as at April 5, 2011_11.00am (Source: Quickcharts)

You may try the SWs (see the table below) to get a bigger bang for your buck. As you are well be aware, SWs are leverage instruments that will give an outsize return if the trade goes your way. If not, it will give you an outsize loss. My preference is for MPHB-JA, which is trading at a premium of less than 1%. MPHB-CC is trading at a discount but it would not be a good choice as it is expiring on April 15.


Table: MPHB's SWs' terms & valuation

Adventa announced a poor results

Results Update

Adventa released its results for QE31/1/2011 yesterday. It is plain to see that the company is still badly affected by the high latex prices as well as the unfavorable forex movement. This dragged its net profit down significantly, resulting in a 66% q-o-q or 57% y-o-y drop in RM4.0 million. Its turnover continued to rise- gaining 17% q-o-q or 39% y-o-y to RM106 million.


Table 1: Adventa's last 8 quarterly results



Chart 1: Adventa's last 26 quarterly results

Financial Position

Adventa's financial position as at 31/1/2011 is fair. Its current ratio stood at 1 time, while debts to equity is quite elevated at 0.7 time. Since 80% of the borrowings were used to finance its working capital requirement, the high debts is deemed acceptable.

Valuation

Adventa (closed at RM2.37 today) is now trading at a PE of 12 times (based on last 4 quarters' EPS of 20 sen). At this multiple, Adventa is deemed fully valued.

Other Comment

The rubber glove sector has been badly affected by the rising latex prices & the strengthening of the RM vis-a-vis the USD. This coupled with the slight overcapacity in the sector has caused the players to adopt a more predatory marketing approach, resulting in margin deterioration. The recent correction in latex prices seems to have run its course & prices are rebounded. The recent recovery in USD has also fizzled out. All in all, the brief ray of hope as mentioned in my recent post has now been dashed.

Technical Outlook

Adventa is still in a downtrend line, with resistance at RM2.45.


Chart 2: Adventa's weekly chart as at Mar 31, 2011 (Source: Quickcharts)

Conclusion

Based on poor financial performance, full valuation & negative technical outlook, Adventa is rated as a SELL (or at best a HOLD).

TSM's second core business starts to shine

Results Update

TSM released its results for QE31/1/2011 yesterday. It is a very good set of results as it incorporates the contribution from its newly-acquired subsidiary, Kenseisha into its books). Its net profit increased by 56% q-o-q or 66% y-o-y to RM12.7 million while turnover increased by 4% q-o-q or 50% y-o-y to RM109 million.


Table 1: TSM's last 8 quarterly results



Chart 1: TSM's last 27 quarterly results

Financial Position

As at 31/1/2011, TSM's financial position is deemed very satisfactory. Its current ratio stood at 3.2 times while debts to equity stood at 0.1 time only.

Valuation

TSM (closed at RM1.90 today) is now trading at a PE of 6.3 times (based on last 4 quarters' EPS of 30 sen). At this multiple, TSM is deemed fairly attractive. With the steady growth in its bottom-line, I believe TSM could command a PE multiple of 9-10 times.

Technical Outlook

TSM has just broken above its short-term downtrend line at RM1.85 as well as the horizontal resistance at RM1.90. Its immediate resistance is at the horizontal line at RM2.08-2.10.


Chart 2: TSM's daily chart as at Apr 1, 2011_9.30am (Source: Quickcharts)

We can see that TSM's long-term uptrend line support is at RM1.65.


Chart 3: TSM's weekly chart as at Apr 1, 2011_9.30am (Source: Quickcharts)

Conclusion

Based on good financial performance, attractive valuation & positive technical outlook, TSM is a good stock for long-term investment.

MEGB- if at first you don't succeed, try again!

MEGB rallied strongly today. As at 3.45pm. MEGB was trading at RM2.14- a gain of 22 sen over the closing price yesterday. Readers may recall that MEGB staged an equally strong rally in early January which saw the share price breaking above the triple resistance of 2nd accelerated downtrend line (R2-R2), 50-day SMA line and horizontal line at RM2.25-2.30. The earlier breakout prompted my recent trading BUY call which unfortunately fizzled out. On everyone's mind is the big question: Is today rally another bear rally?

The built-up to today's strong rally started in March 21 when MEGB broke above its 1st accelerated downtrend line (R1-R1) at RM1.80-1.82. On March 30, it broke above the horizontal resistance at RM1.90. Today it charged up early & broke above the psychological RM2.00 level, followed swiftly by an upside breakout of the strong horizontal line at RM2.05 & the 100-day SMA line at RM2.07. MEGB's next resistance would be the strong horizontal line at RM2.25-2.30.

With MEGB, one has to be very careful. It is not only a case of once bitten, twice shy. The question to ask is whether MEGB is riding on the coattail of SEG, which rallied from RM2.00 in late December 2010 to a recent high of RM3.60. HELP, another educational group, also staged a timid rally in early March which saw the share price rising from RM2.20 to RM2.80. For those who like to get into MEGB, which is a fundamentally decent stock, the safer bet would be to buy on pullback to RM2.00-2.05.


Chart: MEGB's daily chart as at Mar 31, 2011 (Source: Tradesignum)