Chart: DIGI's daily chart as at April 27, 2012_11.00am (Source: Quickcharts)
Friday, April 27, 2012
DIGI broke above its medium-term downtrend line
On April 25, Digi announced its results for QE31/3/2012 where its net profit declined to RM321 million from RM331 million recorded in QE31/3/2011. Its turnover has however increased from RM1.43 billion to RM1.57 billion. When compared to the immediate preceding quarter (QE31/12/2011), Digi's net profit declined by 18.5% due mainly to the inclusion of 2009-2011's tax incentives related to mobile broadband network facilities which resulted in a lower tax rate for that quarter. The management is satisfied with the continued growth in its data revenue & its ability to maintain its EBITDA margin at 47%. It seems that the market shares the same view, resulting in the share price breaking above its medium-term downtrend line at RM4.00. Based on the technical breakout, DIGI could be a trading BUY.
Chart: DIGI's daily chart as at April 27, 2012_11.00am (Source: Quickcharts)
Chart: DIGI's daily chart as at April 27, 2012_11.00am (Source: Quickcharts)
Market Outlook as at April 27, 2012
FBMKLCI broke below the 50-day EMA line at 1576. If no quick recovery kicks in, FBMKLCI would test the horizontal line at 1565 shortly. The breakdown of the main market barometer would aggravate the poor market sentiment and caused more selling over the next few days. In time like this, it is better to adopt a cautious stance and avoid entering large long position.
Chart: FBMKLCI's daily chart as at April 27, 2012_11.00am (Source: Quickcharts)
Wednesday, April 25, 2012
Some interesting stocks to consider
After two days of correction, some stocks have dropped to their immediate support level while others have broken marginally below the support. I have appended below a few stocks for consideration or further action.
1. Stocks that have broken important support level
These include Armada, which broke its uptrend line, & DRBHcom, which broke to the downside of its triangle. Any bearish breakout, with volume & not rectified within a short period, will trigger further selldown.
Chart 1: Armada's daily chart as at April 24, 2012 (Source: Quickcharts)
Chart 2: DRBHcom's daily chart as at April 24, 2012 (Source: Quickcharts)
2. Stocks which are at their important support level
These include Genting, Airasia, Allianz & TWS. The last three names are or will soon be testing their strong support level. This may set the stage for a decent rebound. However, a breakdown of a strong support level could trigger strong selldown.
Chart 3: Genting's daily chart as at April 24, 2012 (Source: Quickcharts)
Chart 4: Airasia's daily chart as at April 24, 2012 (Source: Quickcharts)
Chart 5: Allianz's weekly chart as at April 24, 2012 (Source: Quickcharts)
Chart 6: TWS's daily chart as at April 24, 2012 (Source: Quickcharts)
For readers who have been waiting for a correction to get into the market, this could be the time to start screening through the charts & slowly nibble your selected stocks. Aggressive buying may not be prudent strategy as the market condition is fragile.
1. Stocks that have broken important support level
These include Armada, which broke its uptrend line, & DRBHcom, which broke to the downside of its triangle. Any bearish breakout, with volume & not rectified within a short period, will trigger further selldown.
Chart 1: Armada's daily chart as at April 24, 2012 (Source: Quickcharts)
Chart 2: DRBHcom's daily chart as at April 24, 2012 (Source: Quickcharts)
2. Stocks which are at their important support level
These include Genting, Airasia, Allianz & TWS. The last three names are or will soon be testing their strong support level. This may set the stage for a decent rebound. However, a breakdown of a strong support level could trigger strong selldown.
Chart 3: Genting's daily chart as at April 24, 2012 (Source: Quickcharts)
Chart 4: Airasia's daily chart as at April 24, 2012 (Source: Quickcharts)
Chart 5: Allianz's weekly chart as at April 24, 2012 (Source: Quickcharts)
Chart 6: TWS's daily chart as at April 24, 2012 (Source: Quickcharts)
For readers who have been waiting for a correction to get into the market, this could be the time to start screening through the charts & slowly nibble your selected stocks. Aggressive buying may not be prudent strategy as the market condition is fragile.
Monday, April 23, 2012
Global Markets in correction mode
Looking through some of the major indices, we can get the feeling that these markets are not in such a bad shape. For one thing, all of them are still trading above their intermediate uptrend line (SS) and secondly, they are all above their respective 200-day SMA line. While not discounting the possibility that these two important supports could be violated if Eurozone were to enter another round of crisis, we should treat the current market weakness as a much-needed correction after a rally that lasted 5 months. We must take into account that there were a few good news that the market seems to have ignored. They are:
1. The US economy is growing moderately, which was the basis for Fed's policymakers' decision in March to go slow on further monetary policies;
2. The Chinese economy may avoid hard-landing and is likely to continue to deliver 7-8% growth in the next few years; and
3. Commodity prices are stabilizing or even drifting lower, which should lessening inflationary pressure; thus enabling many central banks to reduce interest rate.
Admittedly, Japan is still struggling to start the engine of growth & Eurozone will be a real drag with its never-ending policies of spending cuts & tax hikes.
While things may appear gloomy at this moment, there are some pockets of sunshine in the global economy landscapes. The recent selldown in many financial assets simply means that investors are demanding a premium for holding risk assets, which is very normal. What is not normal or healthy was the situation that the financial markets were in 2-3 months ago, where almost everything were so rosy. I shall leave you with the thoughts from Howard Marks:
"There are few things as risky as the widespread belief
that there’s no risk, because it’s only when investors are suitably risk-averse
that prospective returns will incorporate appropriate risk premium."
Chart 1: Nasdaq's daily chart as at April 20, 2012 (Source: Stockcharts)
Chart 2: DJIA's daily chart as at April 20, 2012 (Source: Stockcharts)
Chart 3: DAX's daily chart as at April 20, 2012 (Source: Stockcharts)
Chart 4: FTSE's daily chart as at April 20, 2012 (Source: Stockcharts)
Chart 5: STI's daily chart as at April 20, 2012 (Source: Stockcharts)
Chart 6: HSI's daily chart as at April 20, 2012 (Source: Stockcharts)
BRIC to the rescue?
When you looked at the 4 countries that make up the BRIC- Brazil, Russia, India & China- you will find that they are in different stages of recovery after sliding for the most part of 2011. Brazil's BVSP & India' BSE are the stronger indices as both have broken above their intermediate downtrend line as well as staying above its 200-day SMA line. China's SSEC & Russia's RSTI are a mixed bag, with SSEC having broken above its intermediate downtrend line but still trading below the 200-day SMA line while RTSI is above its 200-day SMA line but still trading below its downtrend line.
Chart 1: BVSP's daily chart as at April 20, 2012 (Source: Stockcharts)
Chart 2: RTSI's daily chart as at April 20, 2012 (Source: Stockcharts)
Chart 3: BSE's daily chart as at April 20, 2012 (Source: Stockcharts)
Chart 4: SSEC's daily chart as at April 20, 2012 (Source: Stockcharts)
With signs that the Chinese economy may avoid a hard-landing, BRIC could provide the growth to lift the global economy out of its current doldrum.
Chart 1: BVSP's daily chart as at April 20, 2012 (Source: Stockcharts)
Chart 2: RTSI's daily chart as at April 20, 2012 (Source: Stockcharts)
Chart 3: BSE's daily chart as at April 20, 2012 (Source: Stockcharts)
Chart 4: SSEC's daily chart as at April 20, 2012 (Source: Stockcharts)
With signs that the Chinese economy may avoid a hard-landing, BRIC could provide the growth to lift the global economy out of its current doldrum.
Market Outlook as at April 23, 2012
Sometimes, when you watch a dull movie, you could be caught off guard by a significant development in the story line without realizing it. Such is the deterioration of our main market barometer, FBMKLCI which had caught me by surprise. You will see from the chart below that FBMKLCI had broken below its intermediate uptrend line at 1598 on April 9. There were two attempts to go above the uptrend line. On April 13, it went as high as 1605 & on April 18, it went as high as 1602. Today, FBMKLCI broke below the 20-day EMA at 1592 as well as the horizontal line at 1590. All these taken together should mean that our FBMKLCI could be in for a belated severe correction for the next few days. Its next support levels are the 50-day EMA line at 1576 and then the horizontal line at 1565.
Chart: FBMKLCI's daily chart as at April 23, 2012 9Source: Quickcharts)
I have been watching the FBMKLCI for a breakdown for so long that I became insensitive to its minuscule movement. I compounded my previous mistakes by setting a much lower level as a trigger for a breakdown in the market and that level is the 50-day EMA line. Being a much lower level, I failed to notice the breakdown on April 9. However, I have been very cautious in this market in the past few weeks as the market breadth was very poor, which signaled a market that is due for a more severe correction.
To be frank, I wouldn't mind our FBMKLCI put in a 'proper' correction because it is so out of synch with our broader market as well as with other global markets. Once, the FBMKLCI is in line with other main indices as well as our overall market, we can then be more confident in our analysis of FBMKLCI.
Based on today's 'sharp' correction and the above belated breakdown of the uptrend line, I see the main index could correct for a few days. It may trigger some selldown in overall market but I think this could be a good opportunity to buy some stocks.
Finally, I like to apologize for this late update of an important negative technical development. I admit that I did not see this breakdown until today.
Chart: FBMKLCI's daily chart as at April 23, 2012 9Source: Quickcharts)
I have been watching the FBMKLCI for a breakdown for so long that I became insensitive to its minuscule movement. I compounded my previous mistakes by setting a much lower level as a trigger for a breakdown in the market and that level is the 50-day EMA line. Being a much lower level, I failed to notice the breakdown on April 9. However, I have been very cautious in this market in the past few weeks as the market breadth was very poor, which signaled a market that is due for a more severe correction.
To be frank, I wouldn't mind our FBMKLCI put in a 'proper' correction because it is so out of synch with our broader market as well as with other global markets. Once, the FBMKLCI is in line with other main indices as well as our overall market, we can then be more confident in our analysis of FBMKLCI.
Based on today's 'sharp' correction and the above belated breakdown of the uptrend line, I see the main index could correct for a few days. It may trigger some selldown in overall market but I think this could be a good opportunity to buy some stocks.
Finally, I like to apologize for this late update of an important negative technical development. I admit that I did not see this breakdown until today.
Friday, April 20, 2012
AEONCR improved on its impressive performance
Results Update
For 3-month ended 20/2/2012, AEONCR's net profit increased by 10% q-o-q or 43% y-o-y to RM28 million while its revenue increased by 5% q-o-q or 28% y-o-y to RM94 million. AEONCR's bottom-line & top-line continued to grow due to growth in receivables & increased financial transaction volume while operating expenses remained stable.
Table: AEONCR's last 8 quarterly results
Chart 1: AEONCR's last 19 quarterly results
Valuation
AEONCR (at RM9.05 now) is trading at a PE of 11.4 times (based on last 4 quarters' EPS of 79.68 sen). Given AEONCR's sharp growth of 51% last year, its PEG ratio is only 0.2 time. It would not be prudent to assume that AEONCR can maintain last year's growth and if we dialed back the growth rate to 20%, its adjusted PEG ratio would be 0.5 time- which is still very attractive. As such, I would consider AEONCR to be undemanding at current price.
Technical Outlook
From Chart 2, AEONCR rallied strong since it broke above the 'horizontal' line at RM3.90-4.00 in April 2011 (here). The near-vertical rise has not experienced any serious correction to date. There were two shallow corrections in January & February this year but the share price did not even threaten the 50-day SMA line (see Chart 3). As such, I would consider any pullback to the 50-day SMA line to be a buying opportunity while a break below that line could be a danger sign.
Chart 2: AEONCR's weekly chart as at April 19, 2012 (Source: Tradesignum)
Chart 3: AEONCR's daily chart as at April 19, 2012 (Source: Tradesignum)
Conclusion
Based on good financial performance, attractive valuation & still positive technical outlook, AEONCR is still rated as a good stock for investment purpose.
For 3-month ended 20/2/2012, AEONCR's net profit increased by 10% q-o-q or 43% y-o-y to RM28 million while its revenue increased by 5% q-o-q or 28% y-o-y to RM94 million. AEONCR's bottom-line & top-line continued to grow due to growth in receivables & increased financial transaction volume while operating expenses remained stable.
Table: AEONCR's last 8 quarterly results
Chart 1: AEONCR's last 19 quarterly results
Valuation
AEONCR (at RM9.05 now) is trading at a PE of 11.4 times (based on last 4 quarters' EPS of 79.68 sen). Given AEONCR's sharp growth of 51% last year, its PEG ratio is only 0.2 time. It would not be prudent to assume that AEONCR can maintain last year's growth and if we dialed back the growth rate to 20%, its adjusted PEG ratio would be 0.5 time- which is still very attractive. As such, I would consider AEONCR to be undemanding at current price.
Technical Outlook
From Chart 2, AEONCR rallied strong since it broke above the 'horizontal' line at RM3.90-4.00 in April 2011 (here). The near-vertical rise has not experienced any serious correction to date. There were two shallow corrections in January & February this year but the share price did not even threaten the 50-day SMA line (see Chart 3). As such, I would consider any pullback to the 50-day SMA line to be a buying opportunity while a break below that line could be a danger sign.
Chart 2: AEONCR's weekly chart as at April 19, 2012 (Source: Tradesignum)
Chart 3: AEONCR's daily chart as at April 19, 2012 (Source: Tradesignum)
Conclusion
Based on good financial performance, attractive valuation & still positive technical outlook, AEONCR is still rated as a good stock for investment purpose.
Thursday, April 19, 2012
UEMLand & MRCB signal further weakness ahead
Today has not been a good day. Two out of the three stocks which retailers linked to UMNO/BN broke their strong horizontal support. They are UEMLand & MRCB. The remaining stock still standing is Timecom. This is very telling of the weakness in our market.
Chart 1: UEMland's daily chart as at April 19, 2012 (Source: Quickcharts)
Chart 2: MRCB's daily chart as at April 19, 2012 (Source: Quickcharts)
Chart 3: Timecom's daily chart as at April 19, 2012 (Source: Quickcharts)
I expect to market to continue to drift lower.
Chart 1: UEMland's daily chart as at April 19, 2012 (Source: Quickcharts)
Chart 2: MRCB's daily chart as at April 19, 2012 (Source: Quickcharts)
Chart 3: Timecom's daily chart as at April 19, 2012 (Source: Quickcharts)
I expect to market to continue to drift lower.
Wednesday, April 18, 2012
The Return of the Second & Third liners?
Over the past few days, we saw a bit of recovery amongst the second & third liner stocks. Can this rebound sustain? It is too early to give a definite answer. While we may take comfort in the huge volume traded in the market, we must note that this volume is concentrated in a handful of stocks, which are the usual suspects of syndicated play. For any syndicated play to be worthwhile, there must be sufficient retail players to take up the role of patsies. In my opinion, the rank of patsies has been thoroughly depleted and fresh recruit is hard to come by. As such, this rebound is a tough act & it is running against the clock.
Looking through the charts below, we can see that FBMSCAP has "crossed over" (read: not broke above) its medium-term downtrend line, RR at 12450 on April 6, while FBMACE & FBMFLG are still below their medium-term downtrend line, RR. If these indices can break above their downtrend line, RR, they may stage a recovery similar to January & February this year.
In December 2011, these indices broke below their uptrend line, SS and drifted lower in a downtrend line, R1-R1. Once they broke above R1-R1 in January, they rose until they hit the underside of the earlier uptrend line, SS. FBMSCAP managed to break above uptrend line, SS, while FBMACE & FBMFLG tested uptrend line, SS & reversed course.
In March this year, FBMSCAP, FBMACE & FBMFLG broke below the uptrend line, S-S1. They have been declining in a downtrend line, RR. Can FBMACE & FBMFLG join FBMSCAP & break above their immediate downtrend line, RR at 9520 & 4720, respectively?
Looking through the charts below, we can see that FBMSCAP has "crossed over" (read: not broke above) its medium-term downtrend line, RR at 12450 on April 6, while FBMACE & FBMFLG are still below their medium-term downtrend line, RR. If these indices can break above their downtrend line, RR, they may stage a recovery similar to January & February this year.
In December 2011, these indices broke below their uptrend line, SS and drifted lower in a downtrend line, R1-R1. Once they broke above R1-R1 in January, they rose until they hit the underside of the earlier uptrend line, SS. FBMSCAP managed to break above uptrend line, SS, while FBMACE & FBMFLG tested uptrend line, SS & reversed course.
In March this year, FBMSCAP, FBMACE & FBMFLG broke below the uptrend line, S-S1. They have been declining in a downtrend line, RR. Can FBMACE & FBMFLG join FBMSCAP & break above their immediate downtrend line, RR at 9520 & 4720, respectively?
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| Chart 1: FBMSCAP's daily chart as at April 17, 2012 (Source: Quickcharts) |
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| Chart 2: FBMACE's daily chart as at April 17, 2012 (Source: Quickcharts) |
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| Chart 3: FBMFLG's daily chart as at April 17, 2012 (Source: Quickcharts) |
Tongher poised to next upleg?
UOADEV reported its results for QE31/12/2011on February 27. Its net profit increased by 107% q-o-q or 22% y-o-y to RM8.4 million while its pre-tax profit dropped 15% q-o-q or 32% y-o-y to RM6.6 million. This group enjoys lower effective tax rates due to higher profit contribution from a foreign subsidiary which enjoyed from tax-free benefits. Revenue declined 3% q-o-q but rose 14% y-o-y to RM144 million.
Table: Tongher's last 8 quarterly results
Chart 1: Tongher's last 29 quarterly results
Financial Position
Tongher is in a healthy financial position as at 31/12/2011, with current ratio at 2.48 times and gearing ratio at 0.31 time.
Valuation
Tongher (closed at RM2.39 yesterday) is now trading at a PE of 8.2 times (based on last 4 quarters' EPS of 29 sen). At this PE multiple, Tongher is deemed fairly valued.
(Note: The company has proposed a 1st & final dividend of 22 sen for FY2011. The entitlement date for this dividend has not been fixed yet.)
Technical Outlook
From the weekly chart below, we can see that Tongher appears to have broken above its intermediate downtrend line at RM2.20 in February. However, it has yet to break above its long-term downtrend line at RM2.45-2.50 (see the monthly chart). A breakout of this downtrend line could be the start of Tongher's long-awaited upleg.
Chart 2: Tongher's weekly chart as at April 17, 2012 (Source: quickcharts)
Chart 3: Tongher's monthly chart as at April 17, 2012 (Source: Tradesignum)
Conclusion
Based on improving financial performance, healthy financial position, reasonable valuation & nice technical set-up, Tongher could be a good stock for long-term investment. You may buy on weakness if the stock drift back towards the RM2.00 level or on breakout above the RM2.50 level.
UOADEV may have a bullish breakout
UOADEV broke above its symmetrical triangle at RM1.50 yesterday. With this upside breakout, the stock could test its next resistance at the horizontal line at RM1.60 or even at RM1.75.
Chart: UOADEV's daily chart as at April 17, 2012 9Source: Quickcharts)
UOADEV was listed at an IPO price of RM2.60 (for institutional investors) or RM2.52 (for retail investors) in June 2011. It slid all the way to a low of RM1.18 in early October 2011. It then swiftly rebounded to RM1.70 in late October 2011 and it has been trading within the symmetrical triangle for the past 6 months.
Its financial performance is mixed. For FYE31/12/2011, it reported a net profit of RM403 million on a revenue of RM614 million. This includes a fair value adjustment to its investment properties of RM205 million. If this is excluded, its net profit would be RM198 million. This would translates to an EPS of 16.6 sen. Its Net Assets per share as at 31/12/2011 is RM1.51. At RM1.54, UOADEV is trading at a PE of 9.3 times or Price to book of 1 time. At these multiples, UOADEV is deemed fairly valued.
Recently UOADEV has proposed a 1st & final dividend of 10 sen for FY2011 (here). This gives the stock a dividend yield of 6.5%. The company has also proposed a dividend reinvestment scheme whereby the shareholders can use the dividend payable to purchase the company's stock at a 10% discount to the market price (here). The entitlement date for the dividend has yet to be fixed and it could be the reason for the present price breakout.
Based on technical breakout, UOADEV could be a trading BUY. However, you may want to nibble into this stock on pullback, given the present poor market sentiment.
Chart: UOADEV's daily chart as at April 17, 2012 9Source: Quickcharts)
UOADEV was listed at an IPO price of RM2.60 (for institutional investors) or RM2.52 (for retail investors) in June 2011. It slid all the way to a low of RM1.18 in early October 2011. It then swiftly rebounded to RM1.70 in late October 2011 and it has been trading within the symmetrical triangle for the past 6 months.
Its financial performance is mixed. For FYE31/12/2011, it reported a net profit of RM403 million on a revenue of RM614 million. This includes a fair value adjustment to its investment properties of RM205 million. If this is excluded, its net profit would be RM198 million. This would translates to an EPS of 16.6 sen. Its Net Assets per share as at 31/12/2011 is RM1.51. At RM1.54, UOADEV is trading at a PE of 9.3 times or Price to book of 1 time. At these multiples, UOADEV is deemed fairly valued.
Recently UOADEV has proposed a 1st & final dividend of 10 sen for FY2011 (here). This gives the stock a dividend yield of 6.5%. The company has also proposed a dividend reinvestment scheme whereby the shareholders can use the dividend payable to purchase the company's stock at a 10% discount to the market price (here). The entitlement date for the dividend has yet to be fixed and it could be the reason for the present price breakout.
Based on technical breakout, UOADEV could be a trading BUY. However, you may want to nibble into this stock on pullback, given the present poor market sentiment.
Monday, April 16, 2012
KEURO may continue its uptrend
KEURO tested its intermediate uptrend line, SS at RM1.22 last week. On Friday, it rebounded & broke above its medium-term downtrend line, RR at RM1.25-1.26. This could sign the continuation of its prior uptrend. Based on this, KEURO could be a trading BUY. Due to poor market sentiment, you should buy on pullback towards the breakout level of RM1.25.
Chart: KEURO's daily chart as at April 16, 2012_9.05am (Source: Quickcharts)
The latest issue of the Edge newsletter has a story on KEURO relating to the likely disposal of a substantial stake in the company by its major shareholder, Chan Ah Chye. It also touched on the possibility of IJM raising its stake in KEURO. These two stories are not new development. They were in the news a few months back. Star had published a story of Chan's exit from KEURO in February (here) while the Edge has also published a story about IJM's possible raising of its stake in KEURO in January (here).
Chart: KEURO's daily chart as at April 16, 2012_9.05am (Source: Quickcharts)
The latest issue of the Edge newsletter has a story on KEURO relating to the likely disposal of a substantial stake in the company by its major shareholder, Chan Ah Chye. It also touched on the possibility of IJM raising its stake in KEURO. These two stories are not new development. They were in the news a few months back. Star had published a story of Chan's exit from KEURO in February (here) while the Edge has also published a story about IJM's possible raising of its stake in KEURO in January (here).
Friday, April 13, 2012
Hibiscus-WA - a buying opportunity or a warning??
Hibiscus Petroleum Bhd ('Hibiscus') is the
first Special Purpose Acquisition Company (“SPAC”) listed on Bursa. In October last year, Hibiscus announced its qualifying
acquisition, by acquiring a 35% equity interest in Lime
Petroleum Plc (“Lime”) for a total purchase consideration of USD55 million.
Lime has majority interests in companies with concession rights in three
offshore oil and gas exploration assets located in the United Arab Emirates and Oman.
The qualifying acquisition requires approval from the Securities Commission ('SC') and the shareholders. The former approval was secured from SC on February 16 (here). On March 21, Hibiscus's shareholders unanimously approved the qualifying acquisition (here).
The trading of Hibiscus shares & warrants since the September has been on an uptrend, due partly to the overall recovery in the stock market & partly due to positive sentiment following the announcement of the qualifying acquisition. Now that the company has secured all the necessary approval, the qualifying acquisition should be completed soon.
There is a persistent discount in the price of Hibiscus-WA since the start of the year. This warrant, which will expire in July 2014, has an exercise price of RM0.50 (here). Its conversion to ordinary share is subject to one condition, the completion of the qualifying acquisition. If the qualifying acquisition is a remote event, it may explain the discount in the price of the warrant. But, with all necessary approval secured, the completion of the qualifying acquisition is almost a certainty.
Right now, you can buy Hibiscus-WA at RM1.25, which- after factoring in the exercise price of 50 sen- is at discount of 42 sen when compared to the price of the ordinary share of RM2.17. Is this a buying opportunity or is this a sign of trouble? Investors may be excused for having some doubts as to the timing & eventual completion of the qualifying acquisition, but this should not cripple the insiders to the extent of sitting quietly & ignoring such a juicy trading opportunity. Why aren't the insiders buying? I always believe that when the market serves up a free lunch, we have to be very careful.
Chart: Hibiscus & Hibiscus-WA's daily chart as at April 13, 2012_3.00pm (Source: Quickcharts)
The qualifying acquisition requires approval from the Securities Commission ('SC') and the shareholders. The former approval was secured from SC on February 16 (here). On March 21, Hibiscus's shareholders unanimously approved the qualifying acquisition (here).
The trading of Hibiscus shares & warrants since the September has been on an uptrend, due partly to the overall recovery in the stock market & partly due to positive sentiment following the announcement of the qualifying acquisition. Now that the company has secured all the necessary approval, the qualifying acquisition should be completed soon.
There is a persistent discount in the price of Hibiscus-WA since the start of the year. This warrant, which will expire in July 2014, has an exercise price of RM0.50 (here). Its conversion to ordinary share is subject to one condition, the completion of the qualifying acquisition. If the qualifying acquisition is a remote event, it may explain the discount in the price of the warrant. But, with all necessary approval secured, the completion of the qualifying acquisition is almost a certainty.
Right now, you can buy Hibiscus-WA at RM1.25, which- after factoring in the exercise price of 50 sen- is at discount of 42 sen when compared to the price of the ordinary share of RM2.17. Is this a buying opportunity or is this a sign of trouble? Investors may be excused for having some doubts as to the timing & eventual completion of the qualifying acquisition, but this should not cripple the insiders to the extent of sitting quietly & ignoring such a juicy trading opportunity. Why aren't the insiders buying? I always believe that when the market serves up a free lunch, we have to be very careful.
Chart: Hibiscus & Hibiscus-WA's daily chart as at April 13, 2012_3.00pm (Source: Quickcharts)
Tuesday, April 10, 2012
LPI- time to take profit
Results Update
For QE31/3/2012, LPI's net profit dropped by 20% q-o-q or 19% y-o-y to RM31.5 million while its revenue increased by 3% q-o-q or 15% y-o-y to RM246 million. The decline in its bottom-line is attributable to higher claims incurred & lower net earned premium.
Table: LPI's last 8 quarterly results
From Chart 1, we can see that LPI's top-line has been rising for the past 25 quarters. While its bottom-line has also been on an upwards trajectory, it has slid in the past two quarters. From Chart 2, we can see that the 4-quarter SMA lines for pre-tax & net profit have hooked down for the first time in the past 22 quarters. Is this an one-off decline (which normally coincided with the seasonally weaker 1st quarter) or is it the end of its unbroken growth track record? We will wait & see.
Chart 1: LPI's last 25 quarterly results
Chart 2: LPI's bottom-line for last 25 quarterly results
Valuation
LPI (closed at RM13.98 yesterday) is now trading at a PE of 21 times (based on last 4 quarters' EPS of 66.88 sen). At this PE multiple, LPI is priced to deliver continuous growth. A break in the growth track record as seen in the past two quarters could result in a re-rating to the downside.
Technical Outlook
LPI has been trading in a sideway manner for the past one year. Its resistance is at the horizontal line at RM14.25. Its immediate support levels are at RM13.00, RM12.00 & RM11.50.
Chart 3: LPI's weekly chart as at April 9, 2012 (Source: Tradesignum)
Conclusion
Based on unexciting technical outlook, high valuation & potentially challenging financial performance ahead, I think it is good time to reduce our position in LPI.
For QE31/3/2012, LPI's net profit dropped by 20% q-o-q or 19% y-o-y to RM31.5 million while its revenue increased by 3% q-o-q or 15% y-o-y to RM246 million. The decline in its bottom-line is attributable to higher claims incurred & lower net earned premium.
Table: LPI's last 8 quarterly results
From Chart 1, we can see that LPI's top-line has been rising for the past 25 quarters. While its bottom-line has also been on an upwards trajectory, it has slid in the past two quarters. From Chart 2, we can see that the 4-quarter SMA lines for pre-tax & net profit have hooked down for the first time in the past 22 quarters. Is this an one-off decline (which normally coincided with the seasonally weaker 1st quarter) or is it the end of its unbroken growth track record? We will wait & see.
Chart 1: LPI's last 25 quarterly results
Chart 2: LPI's bottom-line for last 25 quarterly results
Valuation
LPI (closed at RM13.98 yesterday) is now trading at a PE of 21 times (based on last 4 quarters' EPS of 66.88 sen). At this PE multiple, LPI is priced to deliver continuous growth. A break in the growth track record as seen in the past two quarters could result in a re-rating to the downside.
Technical Outlook
LPI has been trading in a sideway manner for the past one year. Its resistance is at the horizontal line at RM14.25. Its immediate support levels are at RM13.00, RM12.00 & RM11.50.
Chart 3: LPI's weekly chart as at April 9, 2012 (Source: Tradesignum)
Conclusion
Based on unexciting technical outlook, high valuation & potentially challenging financial performance ahead, I think it is good time to reduce our position in LPI.
EForce- poised to test its downtrend line
Background
Excel Force MSC Bhd ('EForce') is involved in the provision of software systems for stockbroking industry, such as its Cyberbroker system, Fundamental Analysis system & Investor Relation system. The other company that is involved in this business is another listed company, N2N Connect Bhd ('N2N'). EForce is listed under the Technology sector of the Main Board,while N2N is listed under the Technology sector of the ACE Board.
Recent Development
EForce & N2N will benefit from Bursa Malaysia's program of discontinuing its existing Broker Front End ('BFE') system. All stock brokers are required to acquire a replacement system and that is likely to come from these two companies. For example, Kenaga has selected EForce as our system provider. As more stockbrokers implement this changeover, both EForce & N2N are expected to see a jump in their top-line & bottom-line.
Recent Financial Performance
I have tabulated the results for the last 2 years for the 2 companies. Without doubt, EForce is a better company when compared to N2N.
Table 1: EForce & N2N's results for FYE31/12/2011 & FYE31/12/2010
Financial Position
Financial position of both companies are satisfactory.
Table 2: EForce & N2N's financial position as at 31/12/2011 & 31/12/2010
Valuation
EForce (closed at RM0.35 yesterday) is now trading at a PE multiple of 12 times or at a Price to Book of 1.94 times. It has a dividend yield of 5.7%. On the other hand, N2N, with no dividend payout & reported losses for the past two years, has only a Price to Book multiple to show: Its PB multiple is at 3.91 times.
Technical Outlook
EForce- a quiet stock- is now testing its intermediate downtrend line resistance at RM0.35. If it can break above this resistance, the stock's next upleg may begin.
Chart: EForce's weekly chart as at April 9, 2012 (Source: Quickcharts)
Conclusion
Based on expected better results ahead & interesting technical set-up, EForce is a stock worth close tracking. If it can break above the RM0.35 level, the stock could be a good trading BUY.
Excel Force MSC Bhd ('EForce') is involved in the provision of software systems for stockbroking industry, such as its Cyberbroker system, Fundamental Analysis system & Investor Relation system. The other company that is involved in this business is another listed company, N2N Connect Bhd ('N2N'). EForce is listed under the Technology sector of the Main Board,while N2N is listed under the Technology sector of the ACE Board.
Recent Development
EForce & N2N will benefit from Bursa Malaysia's program of discontinuing its existing Broker Front End ('BFE') system. All stock brokers are required to acquire a replacement system and that is likely to come from these two companies. For example, Kenaga has selected EForce as our system provider. As more stockbrokers implement this changeover, both EForce & N2N are expected to see a jump in their top-line & bottom-line.
Recent Financial Performance
I have tabulated the results for the last 2 years for the 2 companies. Without doubt, EForce is a better company when compared to N2N.
Table 1: EForce & N2N's results for FYE31/12/2011 & FYE31/12/2010
Financial Position
Financial position of both companies are satisfactory.
Table 2: EForce & N2N's financial position as at 31/12/2011 & 31/12/2010
Valuation
EForce (closed at RM0.35 yesterday) is now trading at a PE multiple of 12 times or at a Price to Book of 1.94 times. It has a dividend yield of 5.7%. On the other hand, N2N, with no dividend payout & reported losses for the past two years, has only a Price to Book multiple to show: Its PB multiple is at 3.91 times.
Technical Outlook
EForce- a quiet stock- is now testing its intermediate downtrend line resistance at RM0.35. If it can break above this resistance, the stock's next upleg may begin.
Chart: EForce's weekly chart as at April 9, 2012 (Source: Quickcharts)
Conclusion
Based on expected better results ahead & interesting technical set-up, EForce is a stock worth close tracking. If it can break above the RM0.35 level, the stock could be a good trading BUY.
Friday, April 06, 2012
Oldtown- uptrend to continue
TWSPLNT may have a bullish breakout
TWSPLNT has just broken above the neckline of its inverted Head-&-Shoulder formation at RM5.25. The volume is relatively thin. If you measure the distance between the tip of the Head & the neckline (about RM1.50) & super-impose that to the breakout point at RM5.25, the potential target for this move will be RM6.75. Let's take it as RM6.80.
Chart: TWSPLNT's weekly chart as at April 6, 2012_11.00am (Soure: Quickcharts)
Based on this technical breakout, TWSPLNT could be a trading BUY.
(Note: Due to some delay, the stock has now rallied to RM5.49!)
Chart: TWSPLNT's weekly chart as at April 6, 2012_11.00am (Soure: Quickcharts)
Based on this technical breakout, TWSPLNT could be a trading BUY.
(Note: Due to some delay, the stock has now rallied to RM5.49!)
AMMB- an attractive banking stock
AMMB has recently broken above its intermediate downtrend line at RM6.25. From the weekly chart below, we can that the MACD is entering into the positive territory and the ADX is beginning to rise (after the +DMI move upwards while the -DMI dipped). Both of these positive signals plus the downtrend line breakout means that AMMB is now poised to start on its next upleg.
Chart: AMMB's weekly chart as at April 5, 2012 (Source: Tradesignum)
Chart: AMMB's weekly chart as at April 5, 2012 (Source: Tradesignum)
Some recent positive news flow are the appointment of Ashok Ramamurthy from ANZ as AMMB's Group MD and AMMB's application
to Bank Negara Malaysia to seek the approval of the Minister of Finance for the
possible acquisition of the 100% equity interest held by Kurnia Asia Berhad in
Kurnia Insurans (Malaysia) Berhad (here).
For 9-month ended 31/12/2011, AMMB reported a net profit of RM1.168 billion on revenue of RM6.048 billion (here). Its earning for that period was 39 sen. Thus, its full-year earning would be about 52 sen. AT RM6.34 now, AMMB is trading at a PE of 12.2 times. I believe that AMMB could command a PE of 15 times; thus giving the stock a fair value of RM7.80.
Based on undemanding valuation & bullish technical outlook, AMMB could be a good stock for trading purpose as well as for long-term investment.
Thursday, April 05, 2012
Global Equity Markets as at April 5, 2012
When we looked through the major indices, it's that the US markets are still in an uptrend that began in 2009. From the charts for S&P500 & Nasdaq composite index, you will see that the 200-day SMA line has been rising steadily for the past 3 years. This SMA line had only dipped slight from August 2011 to February 2012 due to the sharp selldown caused by the Eurozone crisis. Since March 2012, the 200-day SMA line has curved up again. This means that the US markets are likely to continue in their uptrend, albeit some correction may set in after the strong rally over the past few months.
Chart 1: S&P500's daily chart as at April 4, 2012 (Source: Stockcharts)
Chart 2: Nasdaq's daily chart as at April 4, 2012 (Source: Stockcharts)
The European markets- being in the center of the Eurozone crisis- are not expected to fare so well. In fact, we can see from the charts for DAX & FTSE that their 200-day SMA line, which hooked down in August 2011, have yet to curve back up.
Chart 3: DAX's daily chart as at April 4, 2012 (Source: Stockcharts)
Chart 4: FTSE's daily chart as at April 4, 2012 (Source: Stockcharts)
Surprisingly, HSI and STI also exhibit the same pattern as the European markets.Why?
Chart 5: STI's daily chart as at April 4, 2012 (Source: Stockcharts)
Chart 6: HSI's daily chart as at April 4, 2012 (Source: Stockcharts)
I feel that the direction of the 200-day SMA line may suggest that the European markets and the two major Asian markets (Hong Kong & Singapore) may be much weaker than the US markets. Even if the 200-day SMA lines were to hook back up for these markets, the upside may be limited. They may travel the same route that taken by Shanghai's SSEC index since 2011. For European markets, the concern of a rerun of the Eurozone crisis will keep investors on the edge. In Asia, investors may stay cautious due to tight monetary policies instituted to check assets inflation as well as consumer price inflation.
Chart 7: SSEC's daily chart as at April 4, 2012 (Source: Stockcharts)
How does Malaysia compare to its Asian counterpart? The movement of the 200-day SMA line for our FBMKLCI is quite similar to those of the US markets. Does this mean that our market may have more underlying strength than we perceived? What could be the basis of this strength? Could it be attributed to the promising story of our ETP? However, we cannot run too far with this story because the strength of our market is confined to a few blue chips and MNCs while the broader market is very weak. Our recent rally to a new all-time high was received with skepticism & disbelief.
Chart 8: FBMKLCI's weekly chart as at April 4, 2012 (Source: Quickcharts)
Finally, you may note that I have drawn an uptrend line onto the RSI indicator for S&P500, Nasdaq, DAX, FTSE, STI & HSI charts. The RSI of all these indices are still in an uptrend, which means that the outlook for these indices is still positive. However, a break below this uptrend line could signal a top for these indices.
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