Perstim: Earnings Stabilized, Dividend Cancelled

Results Update

For QE30/9/2017, Pertima's net profit rose 24% q-o-q but dropped 73% y-o-y to RM3.5 million while revenue dropped 1% q-o-q but rose 18% y-o-y to RM234 million. Revenue dropped q-o-q due to lower sales volume despite higher selling price. Profit before tax rose 27% q-o-q to RM4.4 million due to higher profit margin despite lower sales volume. The management commented that its growth and profitability will be affected by challenging operating environment due to volatility in the forex market and cheap imports from overseas.


Table: Perstim's last 8 quarterly P&L


Graph: Perstim's last 52 quarters' P&L

Valuation

Perstim (closed at RM5.70 yesterday) is now trading at a trailing PER of 15.5 times (based on last 4 quarters' EPS of 36.71 sen). If the 2nd half earnings are similar to the 1st half, then its EPS for FY2018 will be about 12.8 sen. That will push its current year PER to 44.5x. Perstim is very expensive at that PER.

In addition, the company appears to have cancelled its interim dividend. That would lead to a drop in dividend to 20 sen (or less in order to match with earning per share). Assuming dividend is kept at 20 sen, its dividend yield would be lowered to 3.5%. Perstim may no longer be viewed as an income stock if its dividend yield dropped to this level.

All in all, Perstim's valuation is deemed unattractive.

Technical Outlook

Perstim is still in an intermediate uptrend line, SS with support at RM5.50. See Chart 1.


Chart 1: Perstim's weekly chart as at Oct 30, 2017 (Source: Malaysiastock.biz)  

If Perstim breaks below the RM5.50 level, it may continue to slide lower to the next intermediate uptrend line, S1-S1 with support at RM4.00.


Chart 2: Perstim's monthly chart as at Oct 30, 2017 (Source: Malaysiastock.biz)  

Conclusion

Based on challenging operating environment, weaker financial performance & demanding valuation, I revise mt rating for Perstim from Take Profit to Sell.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

MYR: Where is the Promised Improvement?

Investors are waiting for the much-promised recovery in the MYR. They came to that conclusion after seeing the USD-MYR currency pair stick at 4.20 for the past 3 months. From Chart 1, we can see that USD-MYR could be tracing out a 3-fan uptrend formation.

Chart 1: USD-MYR's weekly chart as at Oct 24, 2017 (Source: Investing.com)

The stability in the USD-MYR exchange rate belied the strengthening of MYR. The stability of USD-MYR is due to a rebound in the US Dollar Index. That index, which is moving within an expanding triangle, has recently tested the lower line and is now recovering. See Chart 2 below.


Chart 2: US Dollar Index's weekly chart as at Oct 24, 2017 (Source: Stockchart.com)

A better indication of the strengthening of MYR is shown by the potential breakdown of the uptrend of SGD-MYR exchange rate. From the chart below, we can see that SGD-MYR is trading just below the uptrend line at 3.15.


Chart 3: SGD-MYR's weekly chart as at Oct 24, 2017 (Source: Investing.com)

If MYR continues to strengthen against SGD - especially if it goes below the 3.10 level - we may soon see a trend reversal. Weak MYR has been a boon for exporters and a loss for importers. That may soon change.

Supermx: It Wasn't Meant To Be

Topglov has finally come out to deny that it would be acquiring Supermx nor Adventa after the market speculated that these 2 companies could be the target of its billion Ringgit acquisition. For more, go here. 

This denial will likely lead to a selldown in Supermx back to the price level before the run-up at around RM1.80.

If you had bought into the stock because of this "news", I believe the right course of action would be to sell off the stock & take a loss rather than to hold onto the stock as a long-term investment which wasn't meant to be one to begin with. Any loss suffered in this speculation is much regretted.



Chart: Supermx's daily chart as at Oct 24, 2017_3.30 (Source: Malaysiastock.biz)

Takaful: Earnings Improved Marginally

Results Update

For QE30/9/2017, Takaful's net profit rose 8% q-o-q & y-o-y to RM48.6 million while revenue was mixed- dropped 2% q-o-q but rose 12% y-o-y to RM476 million. Revenue rose y-o-y due to to higher sales generated by both Family Takaful and General Takaful business. Profit before zakat and taxation rose y-o-y due to higher net Wakalah fee income arising from robust business growth in the General Takaful business. Family Takaful business generated higher gross earned contributions of RM948.0 million due to higher sales from Family Takaful mortgage related products. General Takaful business generated higher gross earned contributions of RM413.1 million due to growth in fire and motor classes.


Table: Takaful's last 8 quarters' results


Graph: Takaful's last 45 quarters' results

Valuation

Takaful (closed at RM3.83 last Friday) is now trading at a PE of 16.6 times (based on the last 4 quarters' EPS of 23.07 sen). At this PER, Takaful is deemed fully valued.

Technical Outlook

Takaful has recently tested its long-term uptrend line at RM3.60. The current price rebound could set the stage for its next upleg for the stock.


Chart: Takaful's weekly chart as at Oct 20, 2017 (Source: MalaysiaStock.biz)

Conclusion

Based on satisfactory financial performance & positive technical outlook, Takaful is a good stock for long-term investment despite its fully valuation.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision. 

UOADEV: A Sudden Sharp Drop

Another stock that took a sharp tumble last Friday is UIADEV. There is no news to account for the drop. I normally explain such phenomenon to selling by major shareholders. If that's true in this case, then we might not have seen the end of the selling.

UOADEV is a very well-managed property investment and development group. This could well be a buying opportunity to get into a very dynamic company.

UOADEV (closed at RM2.35 last Friday) is now trading at a trailing PER of 6.1x (based on last 4 quarters' EPS of 38.38 sen) and at a Price ot Book of 1.0x (at a NTA of, with a price target of RM3.00 on 24 August.

Chartwise, the stock is still in a long-term uptrend which fit into a 3-fan uptrend pattern. Currently, UOADEV is resting on the middle fan-line, S-S2 at RM2.35. If this support failed, it will likely drop to the 3rd fan-line with support at RM2.00.

I believe UOADEV could be a buying opportunity at current price. Given the current weak market condition, your buying should be carried out gradually. Good luck!


Chart: UOADEV's weekly chart as at Oct 20, 2017 (Source: Malaysiastock.biz)

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision. 

Notion: A Fiery Moment, A Golden Opportunity? (UPDATED)

Last Friday, Notion dropped sharply hit limit-down price of RM0.66 before rebounding to RM0.70. At around 3.30-4.00pm, Notion was suspended. Later we learned that a fire broke out at its main manufacturing plant in Klang (here).

In the annual report for FY2016, Notion listed down

• 1 Storey Factory with a 2 Storey Office located at Lot 6071, Jalan Haji Manan, Batu 5 1/2, Off Jalan Meru, 41050 Klang, Selangor
• 2 Storey Office Building with Factory Building located at Lot 6123, Jalan Haji Salleh, Batu 5 1/2, Jalan Meru, 41050 Klang, Selangor
• 3 Storey Office Building with Factory Building located at Lot 6123, Jalan Haji Salleh, Batu 5 1/2, Jalan Meru, 41050 Klang, Selangor
• Factory Buildings located No.1/48, Rojana Industrial Park Moo 5, Tambol Kanham, Amphur U-Thai. Pranakorn Sri Ayutthaya, 13210, Thailand
• 1 Storey Industrial Lot located at 63 Tambon Thanu, Amphur Uthai, Pra Nakhon Sri Ayutthaya Province, Thailand

The fire is probably insured. Since this is one of 5 major facilities, the damage will lead to a sharp drop in revenue and, most likely, losses for 1-2 quarters. When the insurance compensation is received, the company will probably make a bigger-than-normal profit.

The question is whether the current price is a good buy. At the closing price of RM0.70, Notion is now trading at a trailing PER of 10.6x & at a Price to Book of 0.64x (assuming the insurance coverage is adequate & includes loss of business).

Chartwise, it is now trading near the strong support from the horizontal line at RM0.67-0.70. Next support is another horizontal line at RM0.50.

I believe the current price could well have fully factored in the loss, if not over-factored in the loss. Thus I believe Notion could be a good buying opportunity.


Chart: Notion's weekly chart as at Oct 20, 2017 (Source: Malaysiastock.biz)

Update:

Notion made an announcement this morning. To wit:

"Notion has adequate insurance coverage - RM350 million for property damage, RM217 million for business interruption up to 18 months. Preliminary estimate of the loss is about RM150 to 200 million. Once we gain access to the site we shall be able to assess the extent of damage and provide a more accurate estimate of loss."

I believe that this announcement should have a positive effect on the share price.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision. 

Kenanga To Hold A Workshop On Cycle Analysis

Kenanga has organized a workshop entitled "Cycle Analysis: Trend In Global Market, Unbreaking the Wealth Code".

In this workshop, you will learn about Cycle Analysis (CA), how does Sovereign Debt Crisis (SDC) affect global market & what are the potential trading opportunities which can help investors to make better investing decisions.

Agenda

 

Trainer Profile

Derick Tan (Founder & Principal Trainer of the "Timing & You" program)

Date & Time

Aug 12, 2017 (Saturday), 9:30am to 12:30pm

Venue

Kenanga Training Centre,

Level 17, Kenanga Tower,

237, Jalan Tun Razak

50 400 Kuala Lumpur

Restriction & Fee Payable

The workshop is free for clients of Kenanga with 6 months or more trading history. Registration is compulsory.

For more detail, go here.

Topglov: Planning A Huge Acquisition

Topglov was reported to be 99% sure that it has a deal in hand to acquire a glove producer that's based in Malaysia. The acquisition will cost about RM1 billion. For more, go here.

There are only 4 large glove producers in Malaysia: Topglov, Harta, Kossan & Supermx. I don't believe the major shareholders of Harta & Kossan would want to sell out. Two years ago, I would not believe Dato' Seri Stanley Thai, the chairman of Supermx would want to sell out either. However, Stanley - reportedly a former colleague of Topglov's chairman Tan Sri Lim in their early working career - is not doing too well. He has some legal problems of insider dealing and his group has some issues with the tax authority. If anyone of the big four glove producers has to sell out, it is most likely Stanley Thai.

Stanley Thai has direct & indirect shareholding of about 35% in Supermx. Supermx has a market capitalization of RM1.22 billion. That's pretty close to the figure quoted by Topglov's Lim. Assuming that Supermx is the acquiree company, what's the fair price of the company?

I have tabulated below the valuation of Supermx, Harta, Kossan & Topglov.



The average PER of Harta, Kossan & Topglov is 29.84x while Supermx's PER is only 17.70x. Assuming that Supermx deserves a PER of 80% of the average PER of Harta, Kossan & Topglov, then it shoudl command a PER of 23.88x. That means Supermx may command a fair value of RM2.47. That's 35% higher than its last done price of RM1.83.

Chartwise, Supermx has broken its long-term uptrend line, SS. The next support is will come from the horizontal line at RM1.60.


Chart: Supermx's monthly chart as at Oct 17, 2017 (Source: Shareinvestor.com)

The interesting question is Why did Lim shares this information in the public. A glove producer based in Malaysia, producing surgical gloves and valued at RM1 billion. Why? I think Topglov has the deal in the pocket and it wouldn't mind not having 100% ownership of Supermx. The higher the market price of Supermx, the lower is the chance of 100% acceptance of Topglov's MGO and the lower is its out-of-pocket expenditure.

I think Supermx could be a good trading BUY. Given the uncertainty in the market, you need to exercise careful discretion if you choose to trade in any stock.

Market Outlook as at October 17, 2017

Investopedia considers a formal downtrend occuring when each successive peak and trough is lower than the ones found earlier in the trend. Looking at Chart 1 below, the downtrend has just occurred. Unless we see a quick rebound in the next 1-2 days, our market is likely to go South.

Chart 1: FBMKLCI's daily chart as at Oct 17, 2017 (Source: Shareinvestor.com)

People will inevitably ask, "Where is the next support?" The answer is 1730. And, below that the next support is at 1700.


Chart 2: FBMKLCI's weekly chart as at Oct 17, 2017 (Source: Shareinvestor.com)

The next 1-2 days will be very critical for our market. This is not what I have expected in the light of US markets going into new high as well as regional markets making new highs. Let's hope the market will prove me correct in my earlier bullish forecast and stay the course for a new high in 2018. Until the quick rebound happens, be careful out there.

Happy Deepavali

I like to wish all my readers of the Hindu faith a HAPPY DEEPAVALI.

Asiafle: A Good Stock For Long-term Investment (UPDATED)

Results Update

For QE30/6/2017, Asiafle's net profit dropped by 12% q-o-q to RM14.2 million on the back of an unchanged revenue of RM91 million. Compared to the same quarter last year, net profit rose marginally by 1% while revenue was also unchanged.

Profit before tax dropped 9.4% q-o-q mainly due to a much lower share of profit of associate (June 2017: RM0.94 million cf. Mar 2017: RM 3.64 million) which was partially offset by improvement in investing results (June 2017: RM 2.0 million cf. Mar 2017: RM 1.4 million) and higher foreign exchange gain (June 2017: RM 1.4 million cf. Mar 2017: RM 368,000). (Note: Asiafle's QE30/6/2017 was announced on 29 August.)


Table: Asiafle's last 8 quarterly results


Graph: Asiafle's past 48 quarterly results
 
Financial Position

Asiafle's financial position is deemed satisfactory as at 30/6/2017, with current ratio at 5.0x and gearing ratio at 0.15x. It was sitting on a net cash balance of RM43 million.

New Business Venture

Asiafle’s existing core business is filing and stationery business. Asiafle is poised to add a second core business when its new venture into paper & plastic disposable food ware takes off in end 2017. Its new business will be based in a 3,200 sq m facility located in Simpang Ampat. For more on this new business, go here.

Valuation

Asiafle (closed at RM3.05 yesterday) is now trading at an attractive PER of 10.5 times (based on last 4 quarters' EPS of 29.08 sen). The stock pays a decent dividend yield of 5.2%. Based on attractive DY and fair PER, Asiafle is deemed to be an attractively priced.

Technical Outlook

From the monthly chart below, we can see that Asiafle is now testing its long-term uptrend line at RM3.00.


Chart 1: Asiafle's monthly chart as at Oct 16, 2017 (Source: Malaysiastock. biz)


Chart 2: Asiafle's weekly chart as at Oct 16, 2017 (Source: Malaysiastock. biz)

Conclusion

Based on satisfactory financial performance & position, fairly attractive valuation & positive long-term technical outlook, Asiafle could be a good stock for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Topglov: Gangbuster Quarter!

Results Update

For QE31/8/2017, Topglov's net profit rose 27% q-o-q or 51% y-o-y to RM99 million while revenue rose 4% q-o-q or 25% y-o-y to RM902 million. Sales Volume (quantity sold) was exceptionally high with double-digit growth of 14.0% as compared to QE31/5/2017. This led to an all-round improvement on its profits. The improved performance was attributed to improvements in product quality and manufacturing efficiency, coupled with new capacity coming on-stream and strong demand growth.

 
Table: Topglov's last 8 quarterly results


Graph: Topglov's last 45 quarterly results

Valuation

Topglov (closed at RM6.01 last Friday) is now trading at a trailing PE of 22.6X (based on last 4 quarters' EPS of 26.55 sen). At this PER, Topglov is deemed fully valued.

Technical Outlook

Since it made a high of RM7.00 in December 2015, Topglov has not traded above the RM6.00. Last Thursday & Friday, it did just that. This may signal a re-test of the all-time high of RM7.00 in the next few months.


Chart 1: Topglov's monthly chart as at Oct 13, 2017 (Source: Malaysiastock.biz)


Chart 2: Topglov's monthly chart as at Oct 13, 2017 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance and positive technical outlook, I think Topglov is poised to go higher. I hereby revise my rating from REDUCE to HOLD.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

HoHup: An Easy Rally!

A few weeks back, I discussed with a client about the successful launch of Malton's The Park 2 Pavilion in Bukit Jalil. This is the project which Hohup is entitled to a 18% share of the gross development value. In addition, Hohup has an adjoining piece of land measuring 10 acres. Thus I rated Hohup as a cheap proxy to ride on growing demand for Bukit Jalil area. Unlike Malton which rose from RM0.90 to RM1.10, Hohup declined from RM0.80 to below RM0.70. Today Hohup announced that it will not go ahead with its Rights Issue to raise fund for its construction & property development business. Under normal circumstances, that would be a bad news. In the present market, it is not. Hohup rose from RM0.67 to RM0.71 as at 4.10pm.

Looking at  the charts below, Hohup can be a good stock to consider for a recovery play. It is trading at the long-term uptrend line, with support just below RM0.70 (see Chart 2). If it can recruit enough buying support, it may even put in a short rally to test the upper line of the downward channel at RM0.85 (see Chart 1).


Chart 1: Hohup's daily chart as at Oct 13, 2017_4.00pm (Source: Malaysiastock.biz)


Chart 2: Hohup's weekly chart as at Oct 13, 2017_4.00pm (Source: Malaysiastock.biz)

Topglov & Harta: Upside Breakout

Topglov and Harta have both broken above their downtrend line. In both cases, the upside breakout was followed by strong rally on substantial volume. For Topglov, the breakout level was at RM5.70 and, for Harta, it was at RM7.00. Since Kossan and Supermx have not witnessed similar upside move, I suspect there is a joint development involving Topglov and Harta. Could it be a merger of these companies? Only time will tell...

Chart 1: Harta's daily chart as at Oct 12, 2017_4.00 (Source: Malaysaistock.biz)


Chart 1: Topglov's daily chart as at Oct 12, 2017_4.00 (Source: Malaysaistock.biz)

Based on the bullish breakout, Topglov and Harta are possible trading BUY. Good luck.

Market Outlook as at October 12, 2017

Our market is at a critical juncture. If it breaks below 1750, it could well be the end of the rally that began in January this year. Lower support levels at 1725 & 1700 are mere stops for a market in search of a bottom. What could possibly cause the rally in our market to end? Politics!


Chart 1: FBMKLCI's daily chart as at Oct 12, 2017_12.30 (Source: malaysiastock.biz)


Chart 2: FBMKLCI's weekly chart as at Oct 12, 2017_12.30 (Source: malaysiastock.biz)

Our rally has always been billed as an election rally. While the election has yet to be called, the ugliness of our politics has shaken the confidence of investors. In the past few days we saw incredulous reports of a huge corruption case in Sabah involving an opponent of the ruling party. How could RM1.5 billion of budget allocation be stolen? Of course, we know bigger sums went missing in a certain company but that's a company controlled by a few crooks. If corruption has reached a point where RM1.5 billion could be carted away from our government ministries, the end is near for Malaysia.

Next, we read about a personal attack on the Sultan of Johor who had earlier spoken out against certain extreme religious practices. What's surprising was the disquiet and inaction on the part of the authority to investigate the case. This has led to much unhappiness in Johor and possibly to the current round of wild talk about secession from the Federation.

Now is a good time to put a swift end to no-holds-barred politicking which we have seen in the past few years. The responsibility rests on our Prime Minister to do the needful and not merely keeping an elegant silence. He must decide what is more important; his political career or the fate of the nation. If he choose to put his survival ahead of the nation, he will not be judged kindly by future generations.

Sunway-WB: Such High Premium? (UPDATED)

If you have been in the market long enough (or, too long for some of us), you may remember one peculiar factoid about company-issued warrants of large construction-based stocks, such as Gamuda and IJM: They tend to have very low premium. My understanding is that these companies consistently issued warrants as sweeteners for their bond issuance and, as result, after the initial euphoria, the warrant premium will drop back to as low as 1-3%. Today, Gamuda has one warrant outstanding- Gamuda-WE- which is trading at a premium of 1.5%. Currently, IJM has no more warrant outstanding. Its last one, IJM-WC had expired in Oct 2014.

Now, the last 2 days we've witnessed the euphoric rise in Sunway-WB. This warrant has an exercise price of RM1.86 and expiring only in Oct 2024. Based on its current price of RM0.70 and share price of RM1.82, Sunway-WB is trading at a premium of 40.4%.

If my observation of past premium for construction groups holds true, the current price of Sunway-WB can only sustain if Sunway share price were to rally strongly & quickly. Otherwise the price of Sunway-WB will likely come down. If you have this warrant, it is advisable to take some profit soon.


Chart 1: Sunway-WB's intra-day chart as at Oct 11, 2017_10.45 (Source: Shareinvestor.com)


Chart 2: Sunway's daily chart as at Oct 11, 2017_10.45 (Source: Shareinvestor.com)

Thanks to a reader's comment, I like to update my post to amend an error in the exercise price.

The exercise price of RM1.86 per Warrant will be effective for a period of one year from the date of issuance of the Warrants. Subsequently, the exercise price is subject to a fixed annual step-down of RM0.07 on each of the anniversary dates from the date of first issuance of the Warrants.

This means that the exercise will drop progressively as follows:

• RM1.86 on and after Oct 4, 2017
• RM1.79 on and after Oct 4, 2018
• RM1.72 on and after Oct 4, 2019
• RM1.65 on and after Oct 4, 2020
• RM1.58 on and after Oct 4, 2021
• RM1.51 on and after Oct 4, 2022
• RM1.44 on and after Oct 4, 2023

How do you determine the premium? To be frank, I am not sure. If we used the average exercise price of RM1.65 - the mid point from the above schedule – then, the premium is about 29% now (based Sunway-WB at 0.675 & Sunway at RM1.80). It still looks expensive.

SKPRES: Next Upleg Beckons?

Result Update

In QE30/6/2017, SKPRES's net profit rose marginally by 1% q-o-q or 83% y-o-y to RM33 million while revenue was mixed, down 11% q-o-q but up 64% y-o-y to RM525 million. Revenue dropped q-o-q mainly due to lower sales recorded in June 2017 as a result of Hari Raya festive holidays. Despite the sharp drop in revenue, PBT dropped only marginally by 1.4% as a result of improved margin due to operational efficiency. (Note: SKPRES's result was announced on August 25.)


Table: SKPRES's last 8 quarterly results


Graph: SKPRES's last 37 quarterly results

Financial Position

As at 30/6/2017, SKPRES's financial position is deemed fairly satisfactory with good current ratio at 1.76x but slightly elevated gearing ratio at 0.92x. (Note: SKPRES's gearing ratio is no worse off when compared to VS's gearing ratio of 1.27x as at 31/7/2017. These EMS groups are doing a roaring business which is very taxing on its capital.)

Valuation

SKPRES (closed at RM1.58 yesterday) is now trading at a PER of 15 times (based on last 4 quarters' EPS of 10.01 sen). Its PEG ratio is 0.4x (based on last 2 years' earning CAGR of 35%). As such, SKPRES is deemed fairly attractive for a growth stock.

Technical Outlook

SKPRES is now testing its recent high of RM1.58. If it can break above level, SKPRES can commence on its next upleg.


Chart 1: SKPRES's weekly chart as at Oct 6, 2017 (Source: ShareInvestor.com)


Chart 2: SKPRES's monthly chart as at Oct 6, 2017 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance, attractive valuation for a growth stock & potentially bullish technical outlook, SKPRES could be a good stock to consider for investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

3A: Testing Its Uptrend Line

Result Update

For QE30/6/2017, 3A's net profit dropped 11% q-o-q but rose marginally by 0.4% y-o-y to RM9.2 million while revenue dropped 0.8% q-o-q but rose by 5.6% y-o-y to RM102 million. Revenue dropped q-o-q due to lower sales. PBT dropped q-o-q due to forex loss this quarter and lower profit margins. (Note: The last quarterly result was announced on August 17, 2017.)


Table: 3A's last 8 quarters' P&L


Graph: 3A's last 16 quarters' P&L

Financial Position

As at 30/6/2017, 3A's financial position is deemed satisfactory with current ratio at 3.76x and gearing ratio at 0.24x.

Valuation

3A (closed at RM1.11 last Friday) is now trading at a PER of 13x (based on last 4 quarters' EPS of 8.66 sen). Its PEG ratio is 0.3x (based on last 3 years' earning CAGR of 45%). As such, 3A is deemed fairly attractive for a growth stock.

Technical Outlook

Over the past 2 years, 3A has risen gradual from RM0.70 in September 2015 to a high of RM1.45 in June 2016. The current correction has brought the share price down to the uptrend line. The support from the uptrend line is at RM1.10.

Chart: 3A's daily chart as at Oct 6, 2017 (Source: Malaysiastock.biz)

Conclusion

Based on good financial performance & financial position, attractive valuation and mildly bullish technical outlook, 3A remains a very good stock to consider for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

SOP: An Attractive Plantation Stock

Background

Sarawak Oil Palms Bhd ("SOP") is involved in the cultivation of oil palms and the operation of palm oil mills. Its business divisions include Plantation, Milling, Downstream, Marketing & Trading and Property Development.

In December 2016, it completed the acquisition of Shin Yang Oil Palm (Sarawak) Sdn Bhd (SYOP) from a related party, Shin Yang Holdings Sdn Bhd (SYHSB) for an enterprise value of RM873 million. This raised its total land bank by 65% to 119,653ha, with planted area increasing by 37% to 87,744ha.

SOP's Planted Hectarage as at December 2016 (from Annual Report for FY2016)

Historical Financial Performance

SOP's revenue has been on a steady uptrend since 2009. Profits, which peaked in FY2011, began to recover in FY2016 mainly due to the favorable palm products average realized prices which more than offset the drop of the Group's FFB production by 11% (as a result of the El-Nino phenomenon). The profits for FY2017 is projected to increase as the 1H2017 has already showed better results due to higher FFB production volume and higher average palm products realized price improvement and a fair value gain on derivative financial instruments of RM27 million.


Graph 1: SOP's last 19 years' P&L

Recent Financial Results

In QE30/6/2017, SOP's net profit dropped 2% q-o-q but rose 100% y-o-y to RM67 million while revenue rose 9% q-o-q or 28% y-o-y to RM1.22 billion.


Table 1: SOP's last 8 quarters' P&L


Graph 2: SOP's last 12 quarters' P&L

Latest Financial Position

As at 30/6/2017, SOP's financial position is deemed healthy with current ratio at 1.65x and gearing ratio at 0.96x.

Valuation

SOP (closed at RM4.17 yesterday) is now trading at a trailing PER of 10.5x (based on last 4 quarters' EPS of 39.6 sen). This compared favorably to other larger plantation groups, like KLK (with PER of 22x) or UTDPLT (with PER of 17x) or GENP (with PER of 18x).

Technical Outlook

SOP has broken above its downtrend line at RM3.60 in August. On October 2, it broke above the "horizontal line" at RM4.00 - albeit on thin volume. Yesterday it continued to rise - still on relatively thin volume. Its immediate resistance is at the horizontal line at RM4.45.


Chart 1: SOP's weekly chart as at Oct 3, 2017 (Source: MalaysiaStock.biz)

SOP is in a long-term uptrend line with support at RM3.50.


Chart 2: SOP's monthly chart as at Oct 3, 2017 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance & position, attractive valuation & positive technical outlook, SOP could be a good stock for long-term investment.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Crude Oil: Just a Pullback

In the past few days, we saw fairly deep correction among O&G stocks. That reflects the sharp correction in crude oil prices. However the correction is not out of order. I expect Brent to drop back to its uptrend line, SS with support at USD 54-55. 

Chart 1: Brent's daily chart as at Oct 2, 2017 (Source: Stockchart.com)

If Brent can stay above the uptrend line - or consolidate around USD54-55 but violating the uptrend line - then the prospect of it breaking above the oval-shape continuation pattern is  still there. When that happens, it may launch into its next upleg.


Chart 2: Brent's daily chart as at Oct 2, 2017 (Source: Stockchart.com)

If you want to get into the O&G sector, you can do so slowly once it is fairly clear that the USD54-55 price level for Brent can hold. Good luck!