Tenaga: The Cost Pass-through Rule Still Applies (Updated)

This morning, Tenaga jumped up more than RM1.00 after it announced that the Government of Malaysia (“Government”) has approved, via a letter from Suruhanjaya Tenaga (“ST”) dated 28 June 2018, the continued implementation of Imbalance Cost Pass-Through (“ICPT”) for the period of 1 July – 31 December 2018. For more, go to here.

Chart 1: Tenaga's daily chart as at June 29, 2018 (Source: Shareinvestor.com)

This is a positive development as the market was concerned over the past few weeks that Tenaga may have to do "national service" by absorbing instead of passing through cost increases. In fact, the market - which is under selling pressure from foreign funds - was gripped by the fear that the new government will go after these companies for their past link to Najib & UMNO. I find that illogical because most of these blue chip stocks are government-linked companies. By default, they are owned by the people of Malaysia. The new government will not be so silly as to harm these companies even if their Chairmen were friendly to Najib & UMNO. The most logical thing to do is to put some pressure on their Board of Directors to remove the Chairman. That's why I believe the sell-down of CIMB is grossly overdone.  

Chart 2: CIMB's daily chart as at June 29, 2018 (Source: Shareinvestor.com)

The Government's decision in regards to the Tenaga cost pass-through rule suggests that it cannot simply pressure TM to lower its broadband charges. Earlier the minister concerned has declared that Unifi should lower its broadband charges by 25% by end of the year (here). This call by the minister has added pressure on TM share price - leading to a sharp drop over the past few weeks.

Chart 3: TM's daily chart as at June 29, 2018 (Source: Shareinvestor.com)

Market Outlook as at June 28, 2018

Our FBMKLCI has been sliding for 13 days up to yesterday. We are not sure how it will perform today though it is now in positive territory as at 3.30pm.

Chart 1: FBMKLCI's daily chart as at June 28, 2018_12.30pm (Source: Shareinvestor.com)

The drop in FBMKLCI has brought the index to the line connecting the low since 2010 (denoted as "AB"). The support from that line should be at 1650. That coincides with the horizontal line too. Thus I believe FBMKLCI should have a decent chance of at least a technical rebound from this level. I would not be surprised if this level may stop the current market sell-off.


Chart 2: FBMKLCI's monthly chart as at June 28, 2018_12.30pm (Source: Shareinvestor.com)

You see the composite charts of FBM70, FBMSCAP, FBMACE & FBMFLG are showing the 2nd & 3rd liner stocks; Ace Market stocks; and the fledgling stocks have not dropped as badly as the blue chip stocks. The drop in blue chips is due to selling by foreign fund managers due to many market fears, notably trade war waged by the U.S. against her major trading partners.


Chart 3: FBM70, FBMSCAP, FBMACE  and FBMFLG's daily chart as at June 28, 2018_12.30pm (Source: Shareinvestor.com)

It is hard to advise on how you should position yourself in a weak market. How much you should hold or buy in a falling market is determined by your own market outlook, experience and pain tolerance. If the market decline is giving you sleepless nights, you should consider reducing your portfolio to a level that allows you to sleep better. On the other hand, you may find share prices are trading at fairly attractive level and you feel like buying in the market now. My advice is to buy slowly so that you won't be joining those who are having sleepless nights. Good luck.

Pohuat: Earning Stabilized

Results Update

For QE30/4/2018, Pohuat's net profit rose 73% q-o-q or 2% y-o-y to RM11 million while revenue dropped 23% q-o-q or 2% y-o-y to RM126 million. Revenue dropped y-o-y due to 12.4%-decline in turnover for the Vietnamese operations, due to lower exchange rate for VND to MYR, which was partially offset by a 16.3%-increase in turnover for the Malaysian operation due to strong orders for our panel-based bedroom sets for the US market.

Despite higher sales, the Malaysian operations reported a lower gross profit margin of 18.1% in the current reporting period against 26.9% in the previous corresponding reporting period due to the
progressive increase in raw material costs as well as the weakening of the USD against the Ringgit which has resulted in lower Ringgit selling prices for our products.

In line with the lower sales, the Vietnamese operations reported a lower profit before tax of RM4.00 million as Profit before tax margin weakened to 5.84% against 9.39% previously due to the shift in our product mix to the affordable ranges and progressive increases in raw material and labor costs over the last 12 months.

During the quarter, Pohuat recorded exceptional gains from fire insurance compensation of RM1.27 million (for its Malaysian operation) as well as a net income of RM3.95 million being the final payment under the Settlement of Enforcement Proceedings Agreement for the disposal of our former subsidiary, Poh Huat Furniture Industries (Qingdao) Co Ltd. If these 2 one-off exceptional items were excluded, Pohuta's profit before tax would be lowered to RM7.4 million. Thus, Pohuat's profit before tax would show a decline compared to the immediate preceding quarter.


Table 1: Pohuat's last 8 quarterly results


Graph: Pohuat's last 46 quarterly results

Valuation

Pohuat (closed at RM1.31 at the end of the morning session) is now trading at a trailing gross PER of 6.4 times (based on last 4 quarters' EPS of 20.65 sen). At this PER, the stock is fairly attractive. In addition, the stock pays dividend totaling 8 sen in last 4 quarter, which translates to an attractive Dividend Yield of 6.1%.

Technical Outlook

In January this year, Pohuat broke its 20-month EMA line at RM1.70, which effectively signaled the end of its uptrend.


Chart 1: Pohuat's monthly chart as at Jun 27, 2018_12.30 (Source: Shareinvestor.com)

After a steady decline over the past 6 months, Pohuat has recently broken above its downtrend line, RR at RM1.30. This means the share price is likely to at least form a base around the RM1.30 level before it may begin its recovery.


Chart 2: Pohuat's weekly chart as at Jun 27, 2018_12.30 (Source: Shareinvestor.com)

Conclusion

Based on good financial performance (albeit weaker than before) and fairly attractive valuation, Pohuat is 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.

NTPM: Earnings Plummeted

Result Update

For QE310/4/20187, NTPM's net profit dropped 88% q-o-q or 87% y-o-y to RM1.2 million while revenue was mixed - dropped by 9%  q-o-q but rose 3% y-o-y - to RM165 million. Revenue increased y-o-y mainly due to the increase in sales of Tissue and Personal Care Products, especially Personal Care products. The decrease in profit before taxation was mainly due to the higher raw material cost.

 
Table: NTPM's last 8 quarterly results


Graph: NTPM's last 51 quarterly results

Valuation

NTPM (closed at RM0.585 yesterday) is now trading  at a PE of 22 times (based on last 4 quarters' EPS of 2.7 sen). At this PER, NTPM is deemed overvalued.

Technical Outlook

NTPM broke its long-term uptrend line, with support at RM0.60 in January this year. Recent rally brought the share price above this uptrend line in May. However it has since dropped below the uptrend line again,


Chart 1: NTPM's monthly chart as at Jun 25, 2018 (Source: Shareinvestor.com)

In addition, we can see that the recent rally failed to surpass its immediate downtrend line, RR at RM0.65.


Chart 2: NTPM's weekly chart as at Jun 25, 2018 (Source: Shareinvestor.com)

Conclusion

Based on poor financial performance, demanding valuation and bearish technical outlook, I downgrading NTPM from a HOLD to a 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.

Magni: Earnings Stayed Weak

Results Update

In QE30/4/2018, Magni's net profit dropped 35% q-o-q or 48% y-o-y to RM20 million while revenue dropped 30% q-o-q or 26% y-o-y to RM221 million.

Group revenue decreased by 26% q-o-q due to 28%-decline in garment revenue mainly due to lower sale orders received and unfavorable foreign exchange movements; 12%-drop in packaging revenue mainly due to the cessation of offset printing packaging (OPP) business in Q4-FYR 2017; and 3%-dip in revenue of the continuing packaging operations (comprising flexible plastic and corrugated packaging) due to lower sale orders received.

PBT decreased by 50.3% q-o-q due to 51%-drop in garment PBT mainly due to lower revenue, higher foreign exchange loss (by RM3.082 million) and higher operating expenses to revenue ratio; 42%-drop in Packaging PBT mainly due to lower revenue in Q4-FYR 2018; and reversal of provision for OPP business closure costs (RM0.307 million) in Q4-FYR 2017.

Table: Magni's last 8 quarterly results


Graph: Magni's last 45 quarterly results

Valuation

Magni (closed at RM5.10 last Friday) has a trailing PE of 9 times (based on last 4 quarters' EPS of 56.15 sen). Albeit the dividend cut, Magni still pays quarterly dividend which totaled 20 sen in the past 4 quarters; giving the stock a DY of 3.9%. Overall, Magni is still fairly valued.

Technical Outlook

Magni could have broken its long-term uptrend.


Chart 1: Magni's monthly chart as at June 22, 2018 (Source: ShareInvestor.com)

However, Magni has recently broken above its intermediate downtrend line, RR. Magni's immediate support will be at RM4.60-4.70.


Chart 2: Magni's weekly chart as at June 22, 2018 (Source: ShareInvestor.com)

Conclusion

Despite the weaker earnings and bearish technical outlook, I would rate Magni a HOLD to reflect a temporary pause in performance of an outstanding 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.

SCGM: Earning Plummeted

Results Update

In QE30/4/2018, SCGM's net profit plunged 97% q-o-q and y-o-y to RM150k while revenue dropped 10% q-o-q or 9% y-o-y to RM48 million. Revenue dropped q-o-q mainly due to lower sales from local and overseas customers which was affected by holidays during the current quarter and strengthening of Ringgit Malaysia against major foreign currencies. PBT dropped sharply q-o-q mainly due to higher resin prices, higher finance costs, higher depreciation charges, higher labour cost and foreign exchange losses incurred during the current quarter.

 
Table: SCGM's last 8 quarterly results

 
Graph: SCGM's last 37 quarterly results

Valuation

SCGM (closed at RM1.81 last Friday) is now trading at a PE of 19X (based on last 4 quarters' EPS of 9.46  sen). Share price will have to go lower to reflect the plummeting earning.

Technical Outlook

SCGM broke its long-term uptrend line, SS with support at RM2.90 in October 2017.


Chart 1: SCGM's monthly chart as at Jun 22, 2018 (Source: Shareinvestor.com)

In the past 3 months, SCGM has rallied to test its downtrend line, RR. With this exceedingly poor financial performance, a breakout of thsi downtrend line is unlikely to happen next few months.


Chart 2: SCGM's daily chart as at Jun 22, 2018 (Source: Shareinvestor.com)

Conclusion

Based on poor financial performance & bearish technical outlook, SCGM is rated a 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.

Superln: Earning Failed to Back Up Recent Price Rally

Result Update

In QE30/4/2018, Superln's net profit dropped 63% q-o-q or 78% y-o-y to RM1.4 million while its revenue dropped 7% q-o-q or 22% y-o-y to RM25 million. Revenue dropped q-o-q mainly attributable to lower insulation sales volume and competitive pricing environment in the current quarter.  The drop in the sales volume was mainly attributed to the fewer workdays resulting from festive holidays, weak local market sentiment prior to the Malaysian General Election and competitive global market. The competitive pricing environment, lower sales volume, coupled with higher cost in production resulting from installation and commissioning of machinery in the production process led to the group registering profit before tax of RM1.4 million in the current quarter as compared to RM5 million in the preceding quarter. Profit after tax of the Group has decreased by RM2.3 million to RM1.4 million as compared to preceding quarter.

Table: Superln's last 8 quarters' results

Graph: Superln's last 21 quarters' results

Valuation

Superln (closed at RM1.52 yesterday) is now trading at a trailing PER of 20x (based on last 4 quarters' EPS of 7.7 sen). At this PER, Superln is deemed fully valued.

Technical Outlook

Superln peaked in August 2017 and went into a steady decline that's captured by the downtrend line, RR. That decline caused the stock to break its long-term uptrend line, SS at RM1.65 in March. In May, the continuous price decline has formed a bottom when the share price managed to climb back above the intermediate downtrend line, RR. From here, Superln will form a base to launch its next upleg. Until then, it is likely to move sideways.


Chart: Superln's weekly chart as at Jun 21, 2018 (Source: Malaysiastock.biz)

Conclusion

Based on weaker financial performance and mildly negative technical outlook, Superln is rated as a SELL until earning has improved or technical outlook has changed.

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.

Market Outlook as at June 22, 2018

FBMKLCI has been sliding for the past 9 days. Yesterday it broke the horizontal support at 1710 as well as the psychological 1700 support. It found support at the intermediate uptrend line, S1-S1 at 1690. Between 1690 and 1650, there are multiple support which may stop the decline and provide the stage for a rebound. 

Chart 1: FBMKLCI's weekly chart as at Jun 22, 2018 (Source: MalaysiaStock.biz)


Chart 2: FBMKLCI's weekly chart as at Jun 22, 2018 (Source: MalaysiaStock.biz)

Many are anxiously watching the technical picture for DJIA. this index is approaching the 200-day moving average line at 24250 as well as the long-term uptrend line, SS at 24000. A break of these supports will bring out even more selling that may end a fine run. Until then, we will have to wait and see how this index will perform in the next few days.


Chart 3: DJIAs weekly chart as at Jun 22, 2018 (Source: Stockcharts.com)

Based on substantial decline over the past few days, I believe our market could be poised for a technical rebound. If you wish to reduce position due to uncertainty in the market, the best time to do that will be on a rebound. Good luck.

Topglov: Earnings Growth Continued

Results Update

For QE31/5/2018, Topglov's net profit rose 8% q-o-q or 51% y-o-y to RM118 million while revenue rose 15% q-o-q or 27% y-o-y to RM1,101 million. Topglov attributed its improved revenue to increased in sale volume of about 8% q-o-q while higher profits was due to improvements in production efficiency and quality, coupled with new capacity coming on-stream and strong demand growth. The bottom-line could have been better if not pricing pressure from the nitrile rubber glove segment which was brought on by the uptrend in nitrile latex prices compared with 2QFY18. As a comparison, the average natural rubber latex price eased 0.5%, while the average nitrile latex price was on the uptrend, increasing by 8.5%.

 
Table: Topglov's last 8 quarterly results


Graph: Topglov's last 48 quarterly results

Valuation

Topglov (closed at RM11.62 mid-day) is now trading at a trailing PE of 34X (based on last 4 quarters' EPS of 24.4 sen). At this PER, Topglov is deemed fully valued

Corporate Exercise 

Topglov has proposed a 1-for-1 bonus issue which is still pending.

Technical Outlook

Driven by strong earning growth & a generous bonus issue, Topglov share price has rallied in a steep uptrend. While the trend is your friend, a sharp rally is always a concern for me.


Chart: Topglov's monthly chart as at Jun 19, 2018_12.30 (Source: Shareinvestor.com)

Conclusion

Based on good financial performance and positive technical outlook, I think Topglov will likely to continue its uptrend. 

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.

Selamat Hari Raya Aidilfitri

I like to wish all my Muslim readers Selamat Hari Raya Aidilfitri.

3 Trading Prospects

 There are a few stocks that are poised to begin their upleg. They are:

1) Binacom

This stock broke above its downtrend line in April. It then moved sideways for 2 months and it broke above the horizontal line at RM0.45 last week.



Chart 1: Binacom's daily chart as at Jun 12, 2018_3.00pm (Source: Shareinvestor.com)

2) Dnex

This stock also broke above its downtrend line in May. It then moved sideways for past few weeks and it finally broke above the horizontal line at RM0.42 last week. Today, it is trading slightly below the breakout level- probably due to forced selling. If it can stay above the RM0.42 breakout level, its upleg may begin.

 

Chart 2: Dnex's daily chart as at Jun 12, 2018_3.00pm (Source: Shareinvestor.com)

3) Prlexus

This stock has broken to the upside of its symmetrical triangle at RM0.75. This could be the begin of its upleg.


Chart 3; Prlexus's daily chart as at Jun 12, 2018_3.00pm (Source: Shareinvestor.com)

Based on technical breakout, these 3 stocks could be potential trading BUYs.

Market Outlook as at June 7, 2018

We saw strong rally in FBMKLCI of about 50 points over the last 2 days ( assuming no sharp drop before the close today). The index tested the 1800 psychological resistance but it failed to stay above that level. At the time of writing this, FBMKLCI is at 1795.

Chart 1: FBMKLCI's daily chart as at Jun 7, 2018_4.00pm (Source: ShareInvestor)

FBM70, representing the 2nd liner stocks, is still in a downtrend. The same goes for FBMSCAP, which represents the 3rd liner stocks.


Chart 2: FBM70's daily chart as at Jun 7, 2018_4.00pm (Source: ShareInvestor)


Chart 2: FBMSCAP's daily chart as at Jun 7, 2018_4.00pm (Source: ShareInvestor)

The recovery in FBMKLCI is to a large extend brought on by the receovery in the banking stocks. We can see that the Finance index rallied from 17500 on Tuesday to 18100 today (Thursday).


Chart 4: Finance's daily chart as at Jun 7, 2018_4.00pm (Source: ShareInvestor)

The construction index has hardly recovered. It is a long way below where it was before GE14. Many pundits and analysts are fairly bearish about this sector. To me, it is too late to be bearish. At such low prices, it is time to consider buying slowly into this sector. In my opinion, the Government will have to do pump-priming very soon. Our economy is at a critical juncture and we can ill afford to tighten our belt any further. As you know, any pump-priming will involve the construction sector. Before long, the stocks you shunned yesterday may be the stocks you will crave for tomorrow. Buy them before the stampede begins.


Chart 5; Construction's daily chart as at Jun 7, 2018_4.00pm (Source: ShareInvestor)

Lastly, the market is likely to be subdued next week due to Hari Raya Aidilfitri holiday. The market will be closed Friday and Thursday will be a half-day. If you have not bought any stock since GE14, next week may be a good time to get some stocks. Good luck!

3 Banking Stocks

The following 3 banking stocks caught my attention yesterday. RHBBANK closed at RM5.61- just slightly above its strong horizontal resistance of RM5.60. This tentative breakout was preceded by steady built-up of volume over the past few days. If it can stay above the breakout level, I think RHBBANK may go to RM6.40-6.50.

Chart 1: RHBBANKS's weekly chart as at Jun 6, 2018 (Source: ShareInvestor)

If RHBBANK can break above the strong horizontal line, ABMB may follow suit and break above its horizontal line at RM4.48-4.50.


Chart 2: ABMBS's weekly chart as at Jun 6, 2018 (Source: ShareInvestor)

Now for the much-maligned AMBANK; this stock has broken above its downtrend line at RM3.65. The last breakout of a downtrend line (in December 2017) saw the stock rallied from RM4.20 to RM4.90.


Chart 3; AMBANKS's weekly chart as at Jun 6, 2018 (Source: ShareInvestor)

Good luck on your trading or bargain hunting!