For the past few days, I was occupied with clients' orders & studying the results announcements. I was unable to post yesterday but I wish to share my thoughts on the market action yesterday.
One glaring aspect of our market action yesterday was the sharp sell-off in Axiata & CIMB. If you juxtaposed the overall weakness in our market with the rise in the other regional markets, you must be wondering what's wrong with Malaysia. Some would say that we have been downgraded, which is probably true. Then again, I am sure the other regional markets would have experienced similar downgrades. I believe that the strong selling yesterday was due to foreign funds' impatient in selling. You see, our market will be closed for 3 & 1/2 days next week. The trading days would be a half day on Monday (August 29) & a full day on Friday (September 2). The long holidays are for Hari Raya & National Day.
If you have to cut your allocation by a certain amount by a certain date, you would pace your rate of selling accordingly. Imagine, if you were instructed on August 25 to sell 10 million shares of stock X by August 31, you would sell a rate of 2 million shares a day over the next 5 business days (August 25, 26, 29, 20 & 31). Unfortunately for Malaysia, you would not have 5 days to do the selling. You would have 2 & 1/2 days. This means that you would have to clear 4 million shares a day. The increased supply overwhelmed the demand (or, buyers) and this led to the current depressed prices.
You may notice that I am commenting less on the market outlook. In first half 2008, I couldn't help myself & I kept pointing out that the market might recover or reverse after making a top. This time, I would stay with my current take that our market has topped, with some prospect of a bear rally (since the sell-off was very sharp). The readers would have to make up their mind whether they want to trade the bear rally. As you can see from the monthly chart below that the 3 indicators are bearish & the index is breaking the 20-month SMA line. The last time, FBM-KLCI broke the 20-month SMA line was in March 2008. A bear rally ensued shortly thereafter but the market was well on the way to a downtrend.
Chart: FBM-KLCI's monthly chart as at August 26, 2011 (Source: Quickcharts)
Hi Alex
ReplyDeleteMalton just announce its Q4 result, record EPS= 7.7sen; cumulative EPS= 20.8sen; NTA = 1.46, Based on closing price of 45.5sen, Malton is currently trading at PE = 2.2x !!.
Its balance sheet also record very strong, with net cash of 31sen/share (cash balance: 224m against ST borrowing: 54.36m + LT borrowing: 60.82m). I believe, Malton could even record better balance sheet after take into account its recent fund raising complete in early July.
could u pls comment how should study with the move of Singapore's GIC invest in Parkson?
ReplyDeleteHi Alex.
ReplyDeleteCan you comment on the fudamental of UOA devp. It's price heading south since IPO.
Hi KENNY BLOG
ReplyDeleteUOA's fundamental looks intact. For QE30/6/2011, UOA reported a pre-tax profit of RM82 mil on sales of RM173 mil. As per its prospectus, UOA's pre-tax profit & sales for FY2010 were RM341 mil & RM375 mil respectively. The high pre-tax profit includes a fair value adjustment to investemnt properties of RM178 mil. If the latter is excluded, UOA's pre-tax profit for FY2010 would be RM163 mil. As such, UOA's results was not disappointing. However, that is historical & what matters is always the future.
The market is worried about a slowdiwn in the property sector to economic slowdown. As I have commented previously, the property market has shown signs of weakness. While secondary transactions are still holding well, these signs do not bolt well for property companies that need to sell hundreds of units in large projects. Among the signs are more overseas sale promotion (as the local market is saturated) as well as repeat advertisement and persistent sms or email regarding some projects. This means that the off-take is slowing. That was not the case in 2010 or even as recently as first quarter 2011.
Hi,Alex,
ReplyDeleteDo enjoy your long holidays ahead.Take a break from whatever charts you are looking at now;coz they are all moving in one direction irrespective of their results.
Have an enjoyable holiday.
Hi Yung
ReplyDeleteWhen I read something like, Singapore's GIC to invest in Parkson, my antenna would rise up. I can imagine this sovereign fund would look thru thousands of prospects a year and zoomed into a more manageable hundreds and finally invest in 20-50 companies every quarter. Any investment is a vote of confidence in that company. Having said that, they take a long-term view and they generally have a long investment time horizon. If that fit your investment objectives, you can ride on their coattails. Chartwise, Parkson has good support at RM5.20-5.40.
Hi hng
ReplyDeleteI agree with the gist of your analysis with regards to the P&L account. On the EPS, I would annualise the net profit for the most recent quarter (to RM107.2 mil) & divide that by the total shares plus RCSLS outstanding (of 557 mil units). Should we deduct the interest on RCSLS of RM8.34 mil? If we do, should we add back the earning from the use of the funds raised via RCSLS? For now, let's ignore the interest on RCSLS.
That would give you a full-year EPS of 19 sen. Still, the PE is about 2.4 times (not far from yours).
On the Balance Sheet, I think the proceed from the RCSLS has been taken into the account, in the form of Cash & Bank Balances [which jumped to RM207 mil from RM61 mil] and Other Payables [which jumped to RM250 mil from RM78 mil]. The latter classification is because the debt instruments might not have been issued yet by the issuing house or investment bank. Until then, the intermediary process was incomplete 7 the debts is treated accordingly as Other Payables. The closing date of the issue was June 27 while listing was on July 8.
Nevertheless, I agree that Malton looks attractive and could be a good stock for investment.
Hi Alex
ReplyDeleteI agree with you, the proceed from fund raising through RCSL could be already take into account that boosted it cash balance.
Malton should then payoff most of bank borrowing that carry interest cost of 8% and save net 2% interest by payout 6% interest back to RCSL holder.
With stronger balance sheet, malton could also be able to pay higher dividend for shareholder, at least higher than last year of 1.5sen.
What is your view on PMIIND and MUIIND, on technical ground?
ReplyDeleteSound more downside ahead..
ReplyDeleteHi solomon
ReplyDeletePMIIND is trading sideway, between RM0.04 & RM0.07.
MUIIND was in a medium-term downtrend until last week when its broke above the downtrend line at RM0.18. However, on the longer term, MUIIND is range-bound between RM0.15 and RM0.27 or RM0.12 and RM0.33.
Hi Alex,
ReplyDeleteIn a bearish market, what are the options for long term investors ?
1) Stay sideline
2) Accumulate cheap and good ?counters without fear (like Warrent Buffet bet on Bank of America) ?
3) Dollar cost averaging for counters that are on hand ?
It would be beneficial to share your vast experience with us
Hi sookpeng
ReplyDeleteThere is no sign that the worst is over. The European sovereign debts problem is hanging over the market like an albatross. with this and other uncertainties, I am inclined to "Stay sideline". I may change my mind earlier if an inspiration hit me.