Monday, April 08, 2013

Ken- another property stock hitching a ride on the Iskandar property play

Ken has broken above its strong horizontal resistance at RM1.30. Its immediate resistance would be the high recorded in 2007, which is either RM1.52. 

Chart 1: Ken's weekly chart as at April 5, 2013 (Source: Quickcharts)

If you looked at the chart from Tradesignum (unadjusted for dividend as compared to the chart from Quickcharts  which is adjusted for dividend), you would notice that the 2007 high is RM1.80 (with an intermediate horizontal resistance at RM1.60). The Tradesignum also shows a breakout above the strong horizontal resistance at RM1.35-1.38. Which chart should we follow? For reason noted below, I am inclined to use the Tradesignum chart.

Chart 2: Ken's weekly chart as at April 5, 2013 (Source: Tradesignum)

Chart 3: Ken's monthly chart as at April 5, 2013 (Source: Tradesignum)

KEN is a profitable small property developer, which aspires to get into the big league. It has a small piece of land in Johor Baru of 9.2 hectares with GDV of RM1.2 billion (here). For FY2012, its net profit dropped to RM16 million from RM23 million due to lower revenue of RM54 million (cf. RM87 million, previously). Its EPS for FY2012 was 18.3 sen as compared to 25.5 sen previously. At last week's close of RM1.39, Ken is trading at a PE of 7.6 times. At this PE multiple, Ken is deemed fairly valued.

Based technical breakout, Ken could be a good trading BUY. The target for this play may be RM1.80.

To adjust for dividend or not to adjust for dividend?

In my opinion, adjustment for dividend should only be made when the dividend is lumpy & substantial. What is substantial is something for each investor to decide. A RM1.00 dividend for a high-priced stock like BAT may be insubstantial in percentage term but in absolute term, it may be eye-popping and investors may adjust the relevant high & low for the dividend paid out. On the other hand, a 5-sen dividend is substantial for a penny stock whether in absolute term or even in percentage term. While I would think that an investor should adjust for that dividend, investors who dabble in penny stocks seldom take note of dividend payout. In such cases, dividend payout may not matter.

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, KEN.


Yee said...

Hi Alex,

Any comments on IVORY and L&G?


Alex Lu said...

Hi Yee,

L&G is testing its downtrend line at RM0.45. If it can surpass that level, its next resistance levels are RM0.50 & RM0.55. Ivory is still in a downtrend line with resistance at RM0.65.

Slowly, the 2nd & 3rd liners property stocks are marching higher. I hope there is enough time for them to show off their potential for I fear that the euphoric market may take profit when our short-term memory loss regarding the GE13 makes a return.