Prlexus- improved financial performance

Results Update

For QE31/7/2013, Prlexus's net profit increased by 59% q-o-q or 111% y-o-y to RM4.3 million while revenue jumped by 61% q-o-q or 51% y-o-y to RM75 million. Profit for the current quarter is significantly higher when compared with that of the preceding quarter due to higher revenue, which was due to increased revenue from its garment segment.


Table 1: Prlexus's last 8 quarterly results


Chart 1: Prlexus's last 27 quarterly results

Valuation

Prlexus (closed at RM1.12 as at 4.30pm) is now trading at a PE of 5.3 times (based on last 4 quarters' EPS of 21 sen). At this PE, Prlexus is deemed fairly valued for a small-cap stock.

Technical Outlook

Prlexus has been trading sideway for the past 3-4 months. The sudden rally may be due to the misunderstanding following the latest results where the EPS is stated at 11.68 sen for QE31/7/2013. The correct EPS is 5.84 sen after the 1-to-2 share split.

Chart 2: Prlexus's daily chart as at September 27, 2013_12.30pm (Source: Quickcharts)

 Conclusion

Based on improved financial performance, Prlexus is still a good stock to hold for long-term investment. However, the stock is fairly valued and the technical outlook is unexciting. The sudden rally may be caused on a misunderstanding of the earning of the stock where the 1-to-2 share split was not accounted for in the computation of the EPS. As such, the stock could be a trading sell as it approaches the recent high of RM1.22.

Note:
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, Prlexus.

Pelikan- a hopeful rally

In October 2012, CSL & Pelikan announced a share swap deal whereby CSL would issue 47.17 million CSL shares in exchange for 50 million Pelikan shares owned by a few shareholders of Pelikan. The deal valued Pelikan shares at RM1.00 apiece and CSL was valued at RM1.06 apiece. The deal was supposed to be a prelude to a tie-up between these two stationery companies to capture the Chinese market. For more, go here.

Earlier this month, CSL & Pelikan announced that the tie-up did not work out due to cultural differences and differences in pricing strategy. For more, go here. Even before this announcement, we have seen steady selling of Pelikan shares by CSL, dated back to July 2013 (here, here, here & here). By September 3, CSL ceased to be a substantial shareholder of Pelikan (here). At that point, CSL's shareholding in Pelikan was reduced to only 12 million shares. After the announcement of the termination of the tie-up and possibly the termination of further selling of Pelikan shares by CSL, Pelikan share price rallied higher.


Chart 1: Pelikan's daily chart as at Sep 27, 2013_12:30pm (Source: Quickcharts)


Chart 2: Pelikan's weekly chart as at Sep 27, 2013_12:30pm (Source: Quickcharts)

CSL share price has been declining steadily over the past one year. There was no announcement of any disposal by substantial shareholders to indicate similar disposal of the stock by those shareholders who obtained CSL shares via the share swap in October 2012. One plausible explanation is that these shareholders' position in CSL was smaller than 5% each and as such, their disposal of the shares (if any) need not be reported to Bursa Malaysia.


Chart 3: CSL's daily chart as at Sep 27, 2013_12:30pm (Source: Quickcharts)


Chart 4: CSL's weekly chart as at Sep 27, 2013_12:30pm (Source: Quickcharts)

There are 2 questions regarding the breakdown of the tie-up between the two parties and the sell-off in Pelikan that must be looked into.
1) Why were the question of pricing strategy & cultural difference not examined before the tie-up was announced?
2) Why was CSL so determined to dispose off its Pelikan shares?

The answer to the second question is important because it will enable you to have an idea whether the sudden rally in Pelikan can sustain after the current reversion-to-the-mean rally. CSL has cash balances of RM1 billion as at 30/6/2013 (here) and it does not need to dispose off the stock in a fire sale. Since CSL dumped the shares in the market, it means CSL must have felt that Pelikan share price is likely to drop in the future. If so, the rally in Pelikan may be fueled more by hope than substance. We would have learned long ago that investing (or, even trading) based on hope can be very tricky.

For your information, I have attached here Pelikan's last 8 quarterly results as well as the chart of Pelikan's last 36 quarterly results.


 Table: Pelikan's last 8 quarterly results


Chart 5: Pelikan's last 36 quarterly results

Based on the above, I believe we must be very careful when trading in Pelikan shares. I have no opinion on CSL. Good luck!

Note:
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, Pelikan & CSL.

Digista may commence its uptrend

Digistar Corporation Bhd ('Digista') is involved in the provision of design, supply, installation and integration of information technology infrastructure, tele-conferencing, local area networks, interactive media management systems, radio and television news automation, telecommunication systems, integrated audio and visual systems and other related electronic systems.

Since making a high of RM0.56 in February 2012. Digista has been trending lower. It broke above its downtrend line, RR at RM0.24 in May 2013. Since that breakout, it has been range-bound between RM0.26 & RM0.32. This morning, it broke above the RM0.32. With this breakout, Digista may commence its uptrend.

Based on the bullish breakout, Digista could be a trading BUY. Its next resistance is at RM0.40 and thereafter at RM0.45.



Chart 1: Digista's daily chart as at Sep 23, 2013_2.50pm (Source: Quickcharts)


Chart 2: Digista's monthly chart as at Sep 23, 2013_11.00am (Source: Quickcharts)

Note:
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, Digista.

BJFood- a consumer stock with potential

Results Update

For QE31/7/2013, BJFood's net profit increased increased by 5% q-o-q or 131% y-o-y to RM5.2 million while revenue increased by 3% q-o-q or 48% y-o-y to RM36.5 million. The increased net profit was due to higher revenue which was mainly brought about by the additional restaurants operating in the current quarter.However, the true extent of the performance was muted by lower same store sales as the Muslim fasting month fell in this quarter under review (that spanned from July 2013 to early August 2013).


Table: BJFood's last 8 quarterly results


Chart 1: BJFood's last 15 quarterly results

Valuation

BJFood (closed at RM1.68 as at Sep 20, 2013) is now trading at a PE of 19.3 times (based on last 4 quarters' EPS of 8.7 sen). At this PE, BJFood is deemed fully valued.

Technical Outlook

BJFood is still in an uptrend line, with support at RM1.65 (see the daily chart, Chart 2). In addition, we can see that BJFood should have good support from the 40-week SMA line at RM1.60 (see the weekly chart, Chart 3).


 Chart 2: BJFood's daily chart as at Sep 20, 2013 (Source: Quickcharts)


Chart 3: BJFood's weekly chart as at Sep 20, 2013 (Source: Quickcharts)

Conclusion

Based on improving financial performance and positive technical outlook, BJFood is still a good stock to hold for long-term investment. However, it is immediate upside is likely to be limited as its valuation is fairly demanding.

Note:
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, BJFood.

Hibiscus- share price stuck oil!

Hibiscus broke above its horizontal line at RM1.60 yesterday. This morning, it broke above its next horizontal resistance at RM1.73 as well as the all-time high of RM1.88. What's driving the share price in a frenzy?

There is a report in the Edge (here) that "Hibiscus and its Australian partner, 3D Oil Ltd, had purchased a drilling rig. The rig, it said, would be the production platform for their West Seahorse oilfield in the Gippsland basin, off the coast of southeast Australia."

"The joint venture is expected to receive regulatory approval by the end of the year, while first oil is expected to begin by early 2015. The field has a best estimated contingent resource of 9.2 billion barrels of recoverable oil."


Map of the West Seahorse oilfield in the Gippsland basin (Source: Uptream)

It is further reported that "Hirex Petroleum Sdn Bhd, a joint venture between Hibiscus subsidiary Orient Hibiscus Sdn Bhd and Rex South East Asia Ltd, has seen the entry of Triax Ventures Corp, which took up 15% equity interest. The stake is equivalent to a capital injection of US$10 million (RM32.74 million) into the JV unit."

"Hirex was formed earlier this year, to pursue investments in exploration assets using Rex's proprietary technology, in 11 countries within the Asia-Pacific region — Malaysia, New Zealand, the Philippines, Vietnam, Australia, Thailand, Brunei, Papua New Guinea, Indonesia, Myanmar and Cambodia. This includes the offshore areas of these countries."

The Edge report was based on a July report published by Upstream, an international Oil & Gas newspaper (here).

From the chart, we can see a vertical rise in the share price. Such an incredible rally is extremely hard to participate in. It is the reverse of the falling knife. It is best to sit back and let sanity return to the market before doing anything with regards to this stock.



Chart: Hibiscus's weekly chart as at September 20, 2013_11.00am (Source: Quickcharts)

Note:
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, Hibiscus.

Market Outlook as at September 19, 2013

The global equity markets rallied on news that the US Fed has decided to defer the 'tapering' of its bond buying program of USD85 billion a month. Everybody is wondering, Who would have known? Well, we can point to the last 2 months of less-than impressive job reports as the reason for the deferment of the tapering.

The next question to ponder is whether the Fed would seriously think about tapering next month when the market will be wrestling with the potential US government shut-down due to the stubborn refusal of the Republicans to extend the US debt ceiling. Surely, the US stock markets would not be able to stomach these twin threats. The strong rebound in the US stock markets shows that the traders are making hail hay while there is sunshine!

With the deferment of the tapering, funds may flow back again to some emerging markets. This will explain the strong rebound in our Bursa Malaysia. This inflow would give a boost to our MYR and that would be bad news for exporters that had out-performed the market over the past few weeks (on the assumption that they would benefit from the weaker MYR).

From the chart below, we can see that FBMKLCI has broken above its medium-term downtrend, RR at 1780 as well as the expanding triangle, ABCD, also at 1780. With this breakout, FBMKLCI will soon test the 1795-1800 level. Until another tapering news from Washington, our market is likely to inch higher.


Chart: FBMKLCI's daily chart as at September 2013_3.00pm (Source: Quickcharts)

Hapseng- the uptrend is about to accelerate??

Yesterday, Hapseng-wa broke above its horizontal resistance of RM0.54. Today, it gained 7.5 sen from RM0.555 to RM0.63. This put Hapseng-wa at an all-time high. See Chart 1.


Chart 1: Hapseng-Wa's daily chart as at September 18, 2013 (Source: Quickcharts)

Hapseng-wa's strong move came after the share had risen steadily over the past 4-5 months. That steady rise came after the sahre broke above the horizontal ressitance at RM1.65 in May (see Chart 2). In August, Hapseng broke above its all-time high of RM2.00 (see Chart 3).


Chart 2: Hapseng's daily chart as at September 18, 2013 (Source: Quickcharts)


Chart 3: Hapseng's weekly chart as at September 18, 2013 (Source: Quickcharts)

The strong move in Hapseng-wa could signal an acceleration in the rise for Hapseng. Something significant is coming for the stock.

Based on the above, Hapseng could be a good trading BUY.

Note:
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, Hapseng.

Focal, Salcon & SPSetia- Liew goes a wandering

Focal Aims Holding Bhd ('Focal') has announced that its major shareholders had signed a conditional share sale agreement with Eco World Development Holdings Sdn Bhd ('EWDH') and Liew Tian Xiong for the sale of 164.78 million shares in Focal (representing 65.05% of Focal's outstanding shares) at RM230.69 million (or RM1.40 apiece).

EWDH is expected to be the vehicle for Liew Kee Sin of SPSetia to carry on his property development business after his retirement from SPSetia which is expected in 2015. EWDH's current shareholders consist of Liew's close associates, such as Abdul Rashid Abdul Manaf and Eddie Leong as well as Liew's son, Liew Tian Xiong.

The entire exercise involved the share purchase agreement as well as the injection of EWDH's 1214 ha land in Iskandar into Focal. That piece of land was acquired at a cost of RM600 million. Focal, an unprofitable developer until recently, also has sizable land bank in Johor. This includes 1011 ha of land in Kota Masai township in Iskandar as well as 426 ha of land in Plentong, Johor Baru. For more on the Focal and the share deal, go here.

My take on this deal:

1) I think the reason why EWDH bought into Focal is because of Kota Masai. If you read the Chairman's Report in Focal Annual REport for 2012 (Page 10), you will come across this paragraph:

The major infrastructure works such as Desaru Bridge, Lebuhraya Persiaran Pantai (“LPP” - also known as 2nd Pasir Gudang Highway), Eastern Dispersal Link (“EDL”) and the Coastal Highway were completed during the financial year under review. The completion of all these highways and bridges had reduced the commuting time drastically between Kota Masai and the city centre as well as Customs, Immigration and Quarantine (“CIQ”). Basically, the travelling time between Kota Masai and the rest of IM had improved. The old concept of far and away had been blurred and the accessibility within the whole of IM had been enhanced overnight. Such was the common impression of all residents at IM and new target markets and products were made possible. The completion of Johor Premium Outlet (“JPO”), Legoland, Puteri Harbour Family Indoor Themepark (Sanrio Hello Kitty Town and The Little Big Club), myriad of universities and private colleges, and hospitals had transformed and elevated IM to a different level. The physical completion of all these establishments boosted the confidence of locals as well as foreigners.

Those who know about SPSetia's masterstroke in acquiring the land now being developed into Setia Alam & Battersea, will see the same potential of the Kota Masai land for future development. Focal has only recently begun its development in Kota Masai where it launched its Phase 1 during FY2012.

2) I feel that EWDH is paying a reasonable price to acquire Focal. Its NTA is about RM1.26 per share. The Plentong land, a land held for development, was carried in its book at RM303 million (or RM700 per hectare) as at 30/9/2012. The Kota Masai land is reflected in the property development cost totaling RM106 million as at 30/9/2012. This item consists of other land such as the Saujana O-lot but if we assumed that it is made up of only the Kota Masai land, then the book value is fairly reasonable- maybe even cheap.

3) The market was expecting EWDH to tie up with Salcon (as noted here) but the deal didn't materialize. My feeling is that Liew has learned a lesson from his involvement in SPSetia- you must have controlling interest in the company. I think the existing shareholders of Salcon were not agreeable to sell of their stake and as such, EWDH only entered into a JV with Salcon.


Chart 1: Focal's monthly chart as at Sep 17, 2013 (Source: Quickcharts)


Chart 2: Salcon's monthly chart as at Sep 17, 2013 (Source: Quickcharts)

Should I get into Focal or Salcon now?

Since Focal has gone up so much, I think it is not worth the risk to buy into that stock. EWDH will be conducting a due diligence on Focal's books and anything can happen. Remember the Naza group's proposed acquisition of Kumpulan Jetson? So, it is safer to wait for the deal to be consummated.

Salcon may be a safer stock to consider even though it is the "rejected bride". It has disposed off its water assets in China for RM518.3 million (here). There is a potential for a special dividend. In addition, it is getting into property development game with Eddie Leong, an associate of Liew, probably leading the team. All in all, Salcon is a cheaper & smaller version of Focal.

What about SPSetia?

With Liew's imminent departure from SPSetia, the stock gives a feeling that it has seen better days. But, wait a minute, the stock is still in an uptrend. I do not expect the stock to charge up anytime soon since it is probably under selling pressure by shareholders who fear that the group may not do well after Liew's departure. From the chart below, I believe that SPSetia will likely to stay above the RM3.00 mark. An upside breakout of the intermediate downtrend line ('cc') at RM3.50 will put the stock above the line of best-fit ('XY') and could signal the recovery for SPSetia. Hang onto SPSetia.


Chart 3: SpSetia's monthly chart as at Sep 17, 2013 (Source: Quickcharts)

Note:
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, Focal, Salcon & SPSetia.

Topglov- late for the party?

Most of the rubber glove stocks rallied in the past 2 months, with one noticeable exception- Topglov . That stock had a short rally in April and since then, it has been consolidating in a flag formation. Today, it is trying to achieve a breakout to the upside. The indicators have curved up nicely. If Topglov can break above the RM6.40 mark convincingly, it can rally like the rest of the rubber glove stocks. Its first resistance would be its 2010 high of RM6.78.

Based on technical consideration, Topglov could be a trading BUY (if it can surpass the RM6.40 mark).


Chart: Topglov's weekly chart as at Sep 12, 2013_10.30am (Source: Quickcharts)

For more on Topglov, go here.

Note:
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, Topglov.

Market Outlook as at September 10, 2013

Two weeks ago, I mentioned that if FBMKLCI were to break below the 1700 mark, our market would be in big trouble (here). We actually broke the 1700 mark but fortunately we managed to snap back up. This recovery means that our uptrend line is still in tact.

Chart 1: FBMKLCI's weekly chart as at Sep 10, 2013_10.00am (Source: quickcharts)

The sharp recovery has brought the index up to the short-term or near-term downtrend line at 1780. As such, I believe the market upside will be capped for a while until we can take out this downtrend line. With so much uncertainties in the air, I believe that downtrend line will remain. For those, who had bought in the late August selldown (or, who were looking to reduce position during that period), the present level is a good level to do some selling.

Good luck.


Chart 2: FBMKLCI's daily chart as at Sep 10, 2013_10.00am (Source: quickcharts)

Ogawa- takeover offer at RM1.05

Yesterday Ogawa was suspended from trading (here). Today, it announced that it has received an offer to buyout all its outstanding shares at RM1.05 apiece from Comfort Enterprise (Hong Kong) Company Limited (here). My earlier posting was a wasted effort as this company may soon be de-listed from Bursa Malaysia.

However, this takeover is a sign that our listed companies are now trading at pretty attractive multiples after our MYR has dropped by 10% over the past 2 months. So, this is another possible angle to screen for stocks to buy- for in addition to stocks involved in export businesses which would obviously benefit from a weaker MYR. 


 Chart 1: Ogawa's 120-min chart as at Sep 10, 2013_11.10pm (Source: Quickcharts)

Looking back, Ogawa was trading at less demanding multiples when compared to its direct competitor, OSIM of Singapore. However, OSIM is 10-time bigger than Ogawa. For FY2012, OSIM reported a revenue of S$616 million & net profit of S$93 million (here). It has cash in hand of S$262 million. Its EPS was S$0.13 and its NTA p.s. was S$0.32. Thus, OSIM (at S$1.94) was trading at a PE of 15 times or a Price to Book of 6 times. On the other hand, Ogawa was trading at a PE of 7 times & PB of 1.2 times.

 
  Chart 2: OSIM's weekly chart as at Sep 9, 2013 (Source: Yahoo Finance)

Note:
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, Ogawa.

Mudajya- secured coal supply for its Indian power plant

Mudajya announced yesterday that it has signed a coal supply agreement for Phase 1 of its coal-fired Thermal Power plant in Chhattisgarh, India. (here) The supply of coal was one of the issues that analysts had been concerned about with regards to this power plant. This supply agreement could be the catalyst for a re-rating of Mudajya, a construction company that specializes in the building power plants. This would dovetail nicely into the expectation that Mudajya may secure one or more of the power plants being planned for by the Energy Commission for the next few years.

Chartwise, we can see that Mudajya's share price has been moving sideway over the past 15-16 months. A close examination will reveal that the trading range is slowly expanding, with immediate resistance at RM2.80 and support at RM2.25. A breakout in either direction will point the way forward for the stock.


Chart 1: Mudajya's daily chart as at Sep 10, 2013_10.50am (Source: Quickcharts)

If Mudajya can break to the upside of the trading range (at RM2.80), the stock may enter into an uptrend. Its first resistance will be the psychological RM3.00 mark. Thereafter it may encounter resistance at RM3.10, RM3.30 & RM3.70.


Chart 2: Mudajya's weekly chart as at Sep 10, 2013_10.50am (Source: Quickcharts)

If Mudajya can surpass the RM2.80 level, the stock can be a trading BUY.

Note:
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, Mudajya.

Wellcal- a good income stock

Results Update

For QE30/6/2013, Wellcal's net profit increased by 38% q-o-q or 10% y-o-y to RM6.8 million while its revenue was mixed- up 16% q-o-q but down 5% y-o-y - to RM35.5 million. The reason for the improvement results was lower cost of raw material (such as rubber) and favorable exchange rate movement. Like many manufacturers, Wellcal will benefit from the weakened MYR.


Table: Wellcal's last 8 quarterly results


Chart 1: Wellcal's last 24 quarterly results

Valuation

Wellcal (currently at RM2.81 as at 12.00pm) is trading at a PE of 16 times (based on last 4 quarters' EPS of 17 sen). The stock is trading near its fair value. However, Wellcal is a good income stock as it pays out nearly 100% of its earning as dividend. Thus the stock has an attractive dividend yield of 6.0%.

Technical outlook

Wellcal is still in an uptrend. It recently broke above its horizontal line at RM2.74. The target of the current move could be RM3.00.


Chart 2: Wellcal's daily chart as at Sep 9, 2013_11.50am (Source: Quickcharts)


Chart 3: Wellcal's monthly chart as at Sep 9, 2013_11.50am (Source: Quickcharts)

Conclusion

Based on good financial performance and still-positive technical outlook, Wellcal remained a good stock for long-term investment. Its upside potential may be limited as it is trading at a PE of 16 times. However, it is a good dividend stock as it has a dividend yield of 6%.

Note:
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, Wellcal.

Ogawa- a sudden rally

Background

Ogawa World Bhd ('Ogawa') is involved in designing, marketing, retailing, distributing, and servicing of health care equipment and supplementary appliances. It provides a range of health and wellness equipment comprising various relaxation, therapeutic, fitness, diagnostic, and hygiene products. For more on the products offered, go to here.

In the past few years, Ogawa has been trying to grow its export markets. From the table below, we can see that FY2013 maybe a breakthrough year for Ogawa as revenue from the export market grew by 45%. It now accounts for 39% of total revenue as compared to 33% in FY2011.

 



Table: Ogawa's domestic & export segment

Recent Financial Results

For QE30/6/2013, Ogawa's net profit increased by 227% q-o-q or 156% y-o-y to RM9.6 million, while turnover increased by 43% q-o-q or 33% y-o-y to RM78 million. The improved performance was attributable to higher sales & higher gross profit margin.


Table: Ogawa's last 8 quarterly results

However, we must take note that the 4th quarter is always the best quarter in Ogawa's short track record of operating for the past 5 years. So, we must be careful not to be too bullish about Ogawa's performance based on this one quarter.



Chart 1: Ogawa's last 20 quarterly results

Valuation

Ogawa (closed at RM0.865 at the end of the morning session) is now trading at a trailing PER of 7 times (based on last 4 qaurters' EPS of 12 sen). At this multiple, Ogawa is deemed fairly valued.

Technical Outlook

Ogawa has broken above its strong horizontal line at RM0.55 on August 19. This morning, it broke above another strong horizontal resistance of RM0.80. It may even test its all-time high at RM0.95. However, we must consider whether the investors are overreacting to the good news which comes around once every four quarters or the stock has finally taken off to a new plane.




Chart 2: Ogawa's weekly chart as at Sep 6, 2013_12.30pm (Source: Quickcharts)

Conclusion

Based on improving financial performance, Ogawa is a good stock for long-term investment. However, the stock is now fairly valued after a sharp rally. As such, some profit-taking is advisable as the stock approaches its all-time high.

Note:
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, Ogawa.

IRCB- rising on hot air

In the past few months, we have seen a few rubber glove producers' share prices rallied nicely. Most of the rally came at the back of improved financial performance. In the coming quarters, we can expect their financial performance to improve.

However, there are also a few lame ducks that had also rallied during this period. One of them is IRCB. This is a stock which has been consistently making losses in the past 3 years: RM38 million in FYE31/1/2011;  RM24 million in FYE31/1/2012; and RM39 million in FYE31/1/2013. In 1Q2014, it again reported a net loss of RM10 million. IRCB, a stock with a 20-sen par value , has seen its NTA p.s. trimmed to only 7 sen due to its persistent poor financial performance.

From the chart, we can see that IRCB may have broken above the strong resistance at RM0.35. Its next resistance will be at RM0.55. What could possibly be driving this stock higher?


Chart: IRCB's weekly chart as at Sept 5, 2013_3.30pm (Source: Quickcharts)

Notwithstanding the promising technical outlook, investors should be very careful when trading in IRCB. From the fundamental point of view, IRCB is now trading well above its fair value and should best be AVOIDED.

Note:
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, IRCB.

KPS & Puncak- The Water Theme Play Maybe Back

After the water shortage over the weekend, the market is convinced that the impetus for a quick resolution to the Selangor water concession stalemate must be at hand. With that, KPS & Puncak - the two stocks most closely tied to the Selangor water concession privatization or buyout play - achieve their bull breakout this morning. KPS broke above its flag formation at RM2.10 while Puncak broke above its triangle at RM2.85.


Chart 1: KPS's daily chart as at Sept 5, 2013_9.30am (Source: Quickcharts)


Chart 2: Puncak's daily chart as at Sept 5, 2013_9.30am (Source: Quickcharts)

With this breakout, these stocks may continue with their prior uptrend.

Note:
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, KPS & Puncak.

KESM- a cheap tech stock

Background

KESM is involved in the provision of semiconductor burn-in services, assembly of electronic components & testing of semiconductor integrated circuits. KESM's financial performance tends to mirror that of the semiconductor sector. In line with the expected recovery in the tech sector, I expect KESM's financial performance would improve in the next few quarters.

Recent Financial Results

For QE30/4/2013, KESM's pre-tax profit increased by 47% q-o-q but dropped 17% y-o-y to RM3.1 million while revenue increased 3% both q-o-q & y-o-y to RM60 million. Due to non-deductible expenses, KESM's effective tax rate was higher than the statutory tax rate. This has affected the profit after tax for KESM for the past 1 year (except for QE31/1/02012).


Table: KESM's last 8 quarterly results


Chart 1: KESM's last 34 quarterly results 

Financial Position

KESM's financial position as at 30/4/2013 is deemed satisfactory, with current ratio at 3.6 times & gearing ratio at 0.16 time. KESM's net cash position is strong at RM71 million. This translates to a cash holding of RM1.65 each share.

Valuation

Due to high effective tax rate, KESM incurred a net loss of RM2.1 million for the past 4 quarters (cumulative). Thus, we can't compute KESM's PE. KESM is cheap as its Price to Book of 0.3 time. In fact, the share price is so low, KESM is only valued at the price of the cash in hand. The market is ignoring the other assets of the company as well as its businesses. On the basis, I believe KESM is an attractive stock for long-term investment.

Technical Outlook

KESM's share price is trapped in a large 'symmetrical triangle', with support at RM1.70 & resistance at RM1.90. The share price has violated the RM1.70 in the past few days on very thin volume but the price has since recovered back above the RM1.70 support.


Chart 2: KESM's weekly chart as at Sept 5, 2013_9.30am (Source: Quickcharts)

Conclusion

KESM could be a good stock for long-term investment in line with the expected recovery in the semiconductor sector. It is relatively cheap, trading at a price equivalent to its cash holding.

Note:
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, KESM.

MPI- the turnaround may begin

Result Update

For QE30/6/2013, MPI reported a net profit of RM10.7 million- an improvement of nearly 5-fold over the immediate preceding quarter and a turnaround from a loss of 7.4 million in the same quarter last year. The improved bottom-line was achieved on the back of increased revenue which rose 14% q-o-q or 18% y-o-y to RM326 million. MPI's revenue for Asia, USA & Europe grew q-o-q by 26%, 5% & 3%. This plus favorable forex movement & cost control measures taken, led to higher profit.


Table: MPI's last 8 quarterly results


Chart 1: MPI's last 26 quarterly results

Outlook for the Tech sector

After many years of cost-cutting, Corporate America is expected to spend to upgrade its IT infrastructure. This is expected to lead to a spending boom for the Tech sector. The same outlook may apply to Europe and to a lesser extent to some part of Asia. This expected increase spending should lift all IT stocks, including MPI. For more, check out these two articles:

1. CREDIT SUISSE: Corporations Are About To Embark On A 4-YearTech Spending Boom; and 

2. Morgan Stanley: The Booming Info Tech Sector Isn't SlowingAnytime Soon

Valuation

As noted before, it is not meaningful to look at MPI's PE multiple as the company has been in & out of the red for the past two years. I better indication of the 'cheapness' of this stock is that it is now trading at a Price to Book of only 0.7 time (based on its current price of RM2.48 & NTA p.s. of RM3.78 as at 30/6/2013).

Technical Outlook

MPI has resting at the strong support of RM2.40 for the past 18 months. This means that all the weak shareholders (or, those who lost heart in the stock) had sold off while new shareholders (probably the majority shareholder, Quek) have bought in or increased their stake in the company. This has been happening in a lean picking period (a period of either loss-making or meager profits) and it could be a prelude to a bumper harvest ahead.


Chart 2: MPI's weekly chart as at Sept 2, 2013 (Source: Quickcharts)

Conclusion

Based on the return to profitability & 'undemanding' valuation, MPI could be a good stock for a recovery play.

Note:
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, MPI.

Apollo- Bottom-line jumped

Result Update

For QE31/7/2013, Apollo's net profit increased 50% q-o-q or 34% y-o-y to RM11 million while revenue was mixed: up 5% q-o-q but lower by 2% y-o-y to RM57 million. Higher demand from both local and export markets had contributed to a q-o-q increase in revenue. The higher sales and the lower operating costs had contributed to the increase in profit.


Table 1: Apollo's last 8 quarterly results


Chart 2: Apollo's last 24 quarterly results

Valuation

Apollo (closed at RM4.14 on August 30) is now trading at a PE of 10 times (based on last 4 quarters' EPS of 43 sen). For a consumer stock, Apollo's valuation is deemed undemanding.

Technical Outlook

Apollo has been holding above RM4.00 for the past 3 months for the past 6 months. The RM4.00 mark will be the strong support for this stock.


Chart 2: Apollo's monthly chart as at Sep 2, 2013_3.00pm (Source: Quickcharts) 

Conclusion

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

Note:
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, Apollo.