Unisem: Earnings Plummeted

Results Update

For QE31/13/2018, Unisem's net profit dropped 81% q-o-q or 87% y-o-y to RM6 million  while revenue dropped 10% q-o-q or 11% y-o-y to RM322 million. Revenue dropped 10.0% y-o-y due to lower revenue in USA and Asia of 3.5% and 21.8% respectively whilst Europe’s segment revenue increased by 2.4%. The decrease in revenue was mainly attributable to the depreciation of USD/MYR exchange rate. The decline in net profit was mainly due to depreciation of USD/MYR exchange rate coupled with lower profit margins arising from change in product mix as well as the recognition of foreign exchange losses of RM9.950 million in the current financial quarter.

Table: Unisem's last 8 quarterly results


Graph: Unisem's last 54 quarterly results

Valuation

Unisem (at RM1.80 as at 4.00pm) is now trading at a PE of 11 times (based on last 4 quarters' EPS of 16.4 sen). At this multiple, Unisem is deemed fairly valued. However we have to wrestle with the big question of whether Unisem's earning has peaked. If earning has peaked, then it will likely to continue to trend lower and so would the share price.

Technical Outlook

Unisem broke its long-term uptrend line, SS at RM2.60 in February. Today it even broke the psychological RM2.00 mark. the next support will be from horizontal lines at RM1.80 & RM1.60.


Chart: Unisem's monthly chart as at Apr 25, 2018_10.00am (Source: Shareinvestor.com)

Conclusion

Based on poor financial performance & bearish technical outlook, Unisem has become a stock in search of a bottom. Despite the sharp decline, we have to be careful when approaching this stock because it could have turned into a value trap in the event its earning has peaked.

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.

Takaful: Strong Earnings Continued

Results Update

For QE31/3/2018, Takaful's net profit rose 24% q-o-q or 23y-o-y to RM70 million while revenue was mixed- rose 44% q-o-q or 13% y-o-y to RM746 million. Revenue rose y-o-y due to to higher revenue 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. Family Takaful business generated higher gross earned contributions of RM324.0 million due higher sales from mortgage and credit-related products. General Takaful business generated higher gross earned contributions of RM182.4 million mainly from fire and motor classes.


Table: Takaful's last 8 quarters' results


Graph: Takaful's last 47 quarters' results

Valuation

Takaful (at RM3.39 as at 3.30pm) is now trading at a PE of 12.7 times (based on the last 4 quarters' EPS of 26.7 sen). At this PER, Takaful is deemed very attractive.

Technical Outlook

Takaful has broken below its long-term uptrend line, SS at RM3.80.


Chart 1: Takaful's monthly chart as at Apr 25, 2018_10.00am (Source: Shareinvestor.com)

Takaful is now moving in an intermediate downtrend line, RR with resistance at RM3.50. If it can break above the RM3.50, it may begin its next upleg.


Chart 2: Takaful's weekly chart as at Oct 20, 2017 (Source: Shareinvestor.com)

Conclusion

Based on satisfactory financial performance & attarcive valuation, Takaful is a good stock for long-term investment. However we will have to wait for the technical outlook to turn positive before taking any aggressive position on this stock.

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

PMetal: Down due to Weaker Aluminium Prices

PMetal dropped 35 sen to RM4.75 as at 10.00am. The sharp drop in PMetal followed equally sharp decline in aluminium prices overnight after the US Government eased sanction on Rusal, the Russian company that's a big exporter of aluminium (here).

Chart 1: PMetal's daily chart as at April 24, 2018_9.30am (Source: Shareinvestor.com)


Chart 2: Aluminium's daily chart as at April 23, 2018 (Source: investing.com)

With the removal of this positive stimulant to the share price of PMetal, it is likely that the latter will revert to the prior downtrend. If that's the case, PMetal is likely to drift down to the horizontal line at RM4.50 or the psychological RM4.00 mark or the recent low of RM3.80. In view of this, you should be careful in trading this stock in the short-term.

BAT: The Bottom could be in.

Today we are again seeing huge volume for British American Tobacco Bhd (BAT). As at 2:45pm, the volume traded for BAT was 1.67 million. BAT (at RM23.90 then) was up RM1.14 from yesterday close. I denoted this as “C”.

This huge volume and the price rally is the opposite of 2 previous days of huge volume in mid-Feb (denoted as “A”) and on April 17 (denoted as “B”). In the sell-off in mid-February, the share price dropped from RM33.00 to RM29.50. The sell-off on April 17 did not cause a noticeable drop in the share price.

These 3 days of huge volume suggests the presence of selling pressure in the market. The change in the price movement – from price decline to relative price stability and finally to price rally - suggest that BAT may finally have dropped to a price level that is cheap enough that we are witnessing a competition among the interested buyers. We can see it very clearly that these buyers are competing and it caused the share price to rally.

Chart 1: BAT's daily chart as at April 19, 2018_2.45pm (Source: Shareinvestor.com)

BAT is a well-managed MNC with a history of profit that stretches back as far as Bursa’s record is available. The last 2 years of lower profit was due mainly to the cost of restructuring as BAT closed its manufacturing plant and shifted its supply chain to a neighbouring country. This is a good opportunity to get into a well-managed company trading at very undemanding multiple.

Chart 2: BAT's monthly chart as at April 19, 2018_2.45pm (Source: Shareinvestor.com)

Graph: BAT's last 18 years revenue, profits and EPS/DPS

I think BAT is now attractive enough to buy since its peak at RM73 in late 2014. BAT’s PER is 13.8 times while its dividend yield is at a eye-popping 7.1%. I recommend this as a long-term BUY.

Note: For more on BAT, go to my earlier post.

Market Outlook as at April 11, 2018

Yesterday our market - along with many regional Asian markets - had a good rally. That rally could be just an oversold rally or it can be more than that. The fact that it came after the Chinese President Xi's speech about lowering of tariff on certain import has certainly took the wind out the sail of the trade warmongers in Washington.

Xi's speech must have been music to the ears in Wall Street as investors jumped into stocks and pushed DJIA up 429 points last night. This goes to show that the strong support at the 23500 mark -  from the uptrend line and the 200-day SMA line - can hold up the market. However, we must note that DJIA has a strong resistance at 24750 mark - from the medium-term downtrend line as well as the 50 & 100-day SMA lines. Thus, DJIA is likely to be trapped between these two levels - 23500 & 24750 - for next few days or weeks.


Chart 1: DJIA's daily chart as at April 10, 2018 (Source: Stockchart.com)

Our market is likely to see further recovery for the 2nd and 3rd liner stocks next few weeks. I don't expect blue chip stocks to move up much as FBMKLCI is less than 20 points away from the recent high of 1880.


Chart 2: FBMKLCI's daily chart as at April 10, 2018 (Source: Shareinvestor.com)


Chart 3: FBM70's daily chart as at April 10, 2018 (Source: Shareinvestor.com)

 
 Chart 4: FBMSCAP's daily chart as at April 10, 2018 (Source: Shareinvestor.com)

The 4 sectors that had dropped sharply are Properties, Construction, Technology and Trading Services. Properties and Construction indices are above their immediate downtrend lines while Technology and Trading Services indices are still testing their downtrend lines.


Chart 5: Properties & Construction's daily chart as at April 10, 2018 (Source: Shareinvestor.com)


Chart 6: Technology & Tradserv's daily chart as at April 10, 2018 (Source: Shareinvestor.com)

I like selective stocks from the Properties, Construction & Gaming sectors as well as a few other stocks like Astro, BAT & LAFMSIA. Good luck!

PMETAL: A Strong Rebound

Yesterday, PMETAL rallied strongly to close at RM4.38. The rally continues today as PMETAL broke above its intermediate downtrend line, RR at RM4.40. It went to a high of RM4.78. The next resistance will be the horizontal line at RM4.85. If it can surpass this level, it may go to RM5.00 or even RM5.25. What caused the strong rebound in PMETAL?

Chart 1: PMETAL's daily chart as at April 9, 2018 (Source: Malaysiastock.biz)

The answer is the sharp rally in the price of aluminium, as shown by the charts below. Aluminium may face resistance at the violated uptrend line, S1-S1 at USD2150.


Chart 2: Aluminium's daily chart as at April 9, 2018 (Source: Investing.com)


Chart 3: Aluminium's daily chart as at April 9, 2018 (Source: Investing.com)

The reason for the sharp rally in aluminium is due to the sanction imposed by the US government on Russian oligarchs for Kremlin's interference in US 2016 Presidential election and aggression in Crimea, Ukraine and Syria (here). The hardest hit is Rusal, a large aluminium exporter from Russia which is controlled by Deripaksa (here).

I think the benefit accruing to PMETAL is likely to be short-lived as commodity prices have a way of finding their equilibrium after a short interval. Unaffected producers may enjoy slightly better pricing term while affected producers will suffer a small disadvantage but not a total loss. Based on this, I believe the rally for PMETAL may run out of steam soon. We will have to wait & see.

Riding the Play of Inclusion in FBMKLCI

Last week, The Edge Financial Daily published an article entitled 10 companies' market cap overtakes FBM KLCI members'. The list is appended below, and I have highlighted the 3 stocks that may be included as component stocks (see green arrows) and 3 stocks that may be excluded (see red arrows).

From The Edge Financial Daily

Since the publication of this article, 2 of the possible new candidates for inclusion into FBMKLCI, Harta & Dialog have rallied strongly while 2 of the possible components of FBMKLCI that may be excluded, i.e. AMBANK and Astro have dropped quite sharply.

Of these 4 stocks, it must be noted that Harta is experiencing a over-factoring since its share price has rallied earlier due to a bonus issue. On the hand, Astro - the midget in the entire list - had reported an improved financial performance but nevertheless was bashed down to a new low since its re-quotation in 2012.

It must be noted that market capitalization is one of the 4 criteria for selection as a component stocks for FBMKLCI; the other being free float, liquidity & investability. In the hurry-burry world, we can get care-away by a rising stock or spooked by a declining issue. Let's not forget that the value of a stock is a function of its financial performance and underlying assets.