Maybank: Steady as she goes

Results Update

For QE30/6/2019, Maybank's net profit rose 7% q-o-q but dropped 1% y-o-y to RM1.94 billion while revenue was up 1% q-o-q or 13% y-o-y to RM13.05 billion. The increase in net profit was attributable to increase in Other Operating Income of RM302 million - the biggest item is net investment income of RM219 million - and (wait for this) decrease in impairment losses on loans, advances, financing and other debts of RM212 million. The latter would be a positive development as the market has been holding its breath- expecting Maybank to take a big hit from Hyflux and other big names.


Table: Maybank's last 8 quarterly results


Graph: Maybank's P&L for last 55 quarterly results

Valuation

Maybank (closed at RM8.57 yesterday) has a PER of 11.8 times (based the last 4 quarters' EPS of 72.79  sen). In addition, it is trading a price to book of 1.2 times (based on NTA of RM7.07 as at 30/6/2019). It has a dividend yield of 6.7%. At these multiples, Maybank is deemed fairly attractive, especially for income-seeking investors.

Technical Outlook

Maybank tested the line connecting the troughs/lows for the past 2 years at RM8.50. It came fairly close to the "uptrend line" SS, where the support would be at RM8.30. Maybank is likely to find support at these prices unless some terribly bad events happened.


Chart: Maybank's weekly chart as at Aug 29, 2019 (Source: MalaysiaStock.Biz)

Conclusion

Based improved financial performance, fairly attractive valuation and long-term positive technical outlook, Maybank remains 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.

CIMB: A Better Performance Actually

Results Update

For QE30/6/2019, CIMB reported a net profit which dropped 24% y-o-y but rose 27% q-o-q to RM1.51 billion. As reported (above), PBT & NP dropped about 20-24% 40% y-o-y due to two exceptional one-off items booked into the account last year (QE30/6/2018): RM928 million gain on sale of 20% of CPAM and 10% of CPIAM. If these 2 items are excluded, the Group operating income rose 13.5% y-o-y, "emanated from the stronger capital market-driven NOII, reflected in the 78.2% y-o-y jump in Wholesale Banking PBT. Consumer Banking PBT was 74.2% lower y-o-y from reduced NII, higher operating expenses and provisions. Commercial Banking improved 89.0% y-o-y from reduced provisions. GVPF improved 229.9% y-o-y from the improved performance in the Group’s fixed income portfolio in 2Q19, which contributed to the Group’s 43.3% y-o-y growth in 2Q19 net profit.


Table 1: CIMB's last 8 quarterly results


Table 2: CIMB's results for QE30/6/2019 cf. QE30/6/2018


Graph: CIMB's P&L for last 32 quarterly results

Valuation

CIMB (closed at RM4.94 yesterday) has a PER of 7.7 times (based the last 4 quarters' EPS of 63.96  sen). In addition, it is trading a price to book of 0.9 time. It has a dividend yield of 5.3%. At these multiples, CIMB is deemed very attractive.

Technical Outlook

CIMB is now resting on the strong support from the horizontal line at RM5.00.


Chart: CIMB's daily chart as at Aug 29, 2019 (Source: MalaysiaStock.Biz)

Conclusion

Based improved financial performance and attractive valuation, CIMB is an excellent 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.

Pestech: Earnings Soared

Background

Pestech International Bhd ("Pestech") is involved in:

• Turkey Substation EPCC
• Transmission line engineering & construction
• Underground cables for electricity transmission & distribution
• SCADA

For more on this company, go here.

Results Update

For QE30/6/2019, Pestech's net profit rose 58% q-o-q or 89% y-o-y to RM34 million while revenue rose 28% q-o-q or 139% y-o-y to RM285 million.

The Group’s revenue rose 139% y-o-y which reflects the stage of on-going transmission, distribution and rail electrification projects. As of 30.6.2019, its order book balance stood at RM1.63 billion, which will be realized progressively over the contract periods. Other income of the Group mainly arose from concession asset and unwinding discount of suppliers for 2 years credit term in current financial year.

The Group’s profit before tax rose 136% y-o-y from RM17.6 million to RM41.5 million due to higher revenue. The PBT margin remained unchanged at 15% for QE30/6/2019.


Table: Pestech's last 8 quarterly results


Graph: Pestech's last 30 quarterly results

Financial Position

As at 30/6/2019, Pestech's financial position is deemed fair with adequate liquidity as reflected in a current ratio of 1.6 times but elevated leverage as reflected in a gearing ratio of 2.8 times.

Valuation

Pestech (closed at RM1.43 yesterday) is now trading at a trailing PER of 13.6x (based on last 4 quarters' EPS of 10.49 sen). At this PER, Pestech is deemed fairly valued. However, if the earnings continue to improve, PER will drop and the stock will be more attractive.

Technical Outlook

Pestech has broken above its intermediate downtrend line, RR at RM1.05 in June this year. It is now hanging onto the horizontal line at RM1.40. Its immediate resistance is the horizontal line at RM1.50 while its next support is the horizontal line at RM1.27-1.30.


Chart: Pestech's weekly chart as at Aug 27, 2019 (Source: MAlaysiastock.biz)

Conclusion

Based on improved financial performance and bullish technical outlook, Pestech 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.

DLady: Earnings Dropped Sharply

Result Update

For QE30/6/2019, DLady's net profit dropped 49% q-o-q or 44% y-o-y to RM17 million while its revenue dropped 8% q-o-q or 4% y-o-y to RM244 million. PBT dropped 42% q-o-q due to lower revenue, category product mix changes, coupled with strategic pricing, increase in raw material prices, negative forex changes and investment in advertising and promotional spend.


Table: DLady's last 8 quarterly results


Chart: DLady's last 45 quarterly results

Valuation

DLady (closed at RM63.90 yesterday) is now trading at a PE of 236 times (based on last 4 quarters' EPS of 181 sen). At this PER, DLady is deemed fully valued.

Technical Outlook

DLady is in a long-term uptrend line (SS), with support at RM63.00. This uptrend line will be severely tested today. A breakdown of the uptrend line would easily send the share prices to RM60.00.


Chart: DLady's monthly chart as at Aug 27, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on weaker financial performance and fully valued proposition, the possibility of a reversal in the price uptrend must not be discounted. I think it is a good idea to take profit on DLady.

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.

ABMB: A Big Jolt!

Results Update

For QE30/6/2019, Alliance Bank Malaysia Bhd ("ABMB")'s net profit dropped 31% q-o-q or 44% y-o-y to RM77 million. The sharp drop in profits was mainly due to expected credit losses stemming from the impairment of a few large accounts amounting to RM74.9 million, and the continued investment in IT infrastructure to support the Group’s Transformation initiatives.


Table: ABMB's last 8 quarterly results


Graph: ABMB's last 24 quarterly results

Valuation

ABMB (closed at RM2.92 today) is now trading at a trailing PER of 9.4x (based on last 4 quarters' EPS of 30.9 sen) or at a Price to book value of 0.8 time (based on net assets per share of RM3.69). At these multiples, ABMB is deemed fairly valued.

Technical Outlook

ABMB broke below its long-term uptrend line, SS at RM3.70 in May this year. Today, it broke below the psychological support at RM3.00. Its next support is at the horizontal line at RM2.75.

  
Chart: ABMB's weekly chart as at Aug 27, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on the weaker financial performance and the bearish technical outlook, ABMB is a stock to be treated with caution for the next few days or weeks. However, if the share price can form a base, it can be a good stock to consider for recovery play. It is a well-managed niche bank trading at fairly undemanding multiples after this sharp drop.

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.

CSCStel: Earnings Rebounded

Results Update

For QE30/6/2019, CSCStel's net profit rose 174% q-o-q or 21% y-o-y to RM12.6 million while revenue rose 4% q-o-q or less-than 1% y-o-y to RM344 million.


Table 1: CSCStel's last 8 quarterly results

The Group’s revenue increased q-o-q mainly driven by the increase in sales volume of GI and PPGI products which more than offset the decline in sales volume for CRC. On a year-to-year basis, sales volume of GI and PPGI products dropped but was fully offset by increase in sales volume for CRC.

Table 1: CSCStel's sales revenue & volume from various segments

As a result, the Group’s profit before tax increased substantially, registering RM16.1 million in the current quarter compared with RM5.8 million in the preceding quarter. The significant improvement in profit of 176% mainly attributed to higher margin for certain steel products and the lower production cost as a result of lower raw material prices amid an intensely competitive steel market.


Graph: CSCStel's P&L for last 47 quarterly results

Financial Position

As at 30/6/2019, CSCStel's financial position is deemed very healthy with current ratio at 8.4 times and gearing ratio at 0.12 time. It has net cash of RM184 million which is equivalent to RM0.48 per share.

Valuation

CSCStel (RM1.01 yesterday) has a PER of 21 times (based the last 4 quarters' EPS of 4.9  sen). If the cash balance of RM0.48 per share is deducted from the share price, CSCStel's PER will be reduced to 11 times. At this PER multiple, CSCStel is deemed fair. Due to the loss incurred, CSCstel reduced its dividend of 10 sen to 4 sen. As a result, its dividend yield plunged to 4%.

Technical Outlook

CSCStel is now resting on its long-term uptrend line, SS at RM1.00. The MACD seems poised to cross above the signal line. When that happens, the share price should be on an uptrend.


Chart: CSCStel's monthly chart as at Aug 26, 2019 (Source: MalaysiaStock.Biz)

Conclusion

Based improved financial performance & healthy financial position, fair valuation and mildly bullish technical outlook, CSCStel 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.

Market Outlook as at Aug 23, 2019

Our market ended last week on a slightly bullish note. MACD turned up and crossed above the signal line. The -DMI appears to have peaked and turned back down while +DMI appears to have bottomed and turned back up. While ADX is still at a high, this may drop back in line with a declining -DMI. Lastly, stochastic is beginning to climb up from its oversold position. All in all, our market is poised for a rebound. Alas, that mildly positive set-up may not come to pass...

Chart 1: FBMKLCI's daily chart as at August 23, 2019 (Source: Malaysiastock.biz)

Thanks to the extremely stable genius in Washington, the global economy is in a greater state of uncertainty because he wanted an easy-to-win trade war. Sometimes some people shouldn't get what they wish for. After China decided to up the stake in the trade war last Friday, US markets swooned. DJIA dropped 623 points. This adds to the fear that the US economy will be in a recession a few months down the road after the dreaded inverted yield curve flashed on August 14 and appeared again on August 23 (here). Has DJIA made a slanting triple top? Is it tracing out an inverted head-&-shoulders at the top of the market? Right now, it is wishful to ask for DJIA to climb up to 27500 in order to form the right shoulder of an inverted head-&-shoulders formation. 

Chart 2: DJIA's daily chart as at August 23, 2019 (Source: Stockcharts.com)

The global markets are now held ransom by events that are out of our control. We have to concentrate on stock fundamentals and invest cautiously according to our plan. Good luck!

Deleum: Earnings Recovered

Results Update

For QE30/6/2019, Deleum returned to profitability after it went into the red in the immediate preceding quarter, QE31/3/2019. It reported a net profit of RM8.7 million as compared to a net loss of RM1.80 million reported in QE31/3/2019. As compared to last year, net profit dropped 5.6% on the back of a 52%-increase in revenue to RM212 million.

Net profit rebounded back q-o-q basis due to stronger segment contributions from both Power and Machinery and Integrated Corrosion Solution segments, offset by lower results from Oilfield Services segment due to margins compression for its slickline services. Share of results of joint venture, which was contributed by the overhaul and repairs of gas turbines, dropped slightly from RM394k to RM356k due to higher overhead expenses incurred on repair and maintenance works in the current quarter. Share of results of associates increased by RM0.2 million as a result of stronger contribution recorded from 2MC in both its dry bulk and liquid mud businesses in the current quarter.


Table: Deleum's last 8 quarterly results 


Graph: Deleum's last 51quarterly results

Financial Position

Deleum's financial position weakened as at 30/6/2019, when compared to last year. Its current ratio dropped from 1.9 times to 1.5 times while total liabilities to equity rose from 0.6 time to 0.9 time. The deterioration in financial position warrants greater caution on this stock.

Valuation

Deleum (closed at RM0.82 yesterday) is now trading at a PE of 14 times (based on EPS of 5.85 sen for the past 4 quarters). At this PER, Deleum is deemed fair. Dividend payment has dropped from 4.5 sen to 3.65 sen- giving the stock a still-decent dividend yield of 4.45%.

Technical Outlook

Deleum share price is resting on the line connecting its lows for the past 10 years. The indicators are fairly weak. If this support is broken, Deleum may revisit the low of July 2017 at RM0.75.


Chart 1: Deleum's monthly chart as at Aug 23, 2019_12.30 (Source: Malaysiastock.biz)


Chart 2: Deleum's weekly chart as at Aug 23, 2019_12.30 (Source: Malaysiastock.biz)

Conclusion

With the improved financial performance and fair valuation, balanced against the weaker financial position & poor technical outlook, I would rate Deleum as a 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.

Allianz: Earnings Growth Accelerated

Result Update

For QE30/6/2019, Allianz's net profit rose 19% q-o-q or 31% y-o-y to RM118 million while revenue rose 1.6% q-o-q or 4.5% y-o-y to RM1.366 billion. The Group’s operating revenue rose 1.6% q-o-q to RM1.37 billion due to a 1.8%-increase in general insurance segment’s operating revenue to RM582.1 million [due mainly to higher gross earned premiums in the current quarter] and a 1.5%-increase in  life insurance segment’s operating revenue to RM780.7 million [due mainly to higher investment income in the current quarter].

The Group’s profit before tax rose 17.5% to RM177.7 million due mainly to higher profit contribution from both insurance segments. The profit before tax of general insurance segment rose 6.6% to RM91.7 million, due mainly to better underwriting profit as a result of lower management expenses. Meanwhile, the profit before tax of life insurance segment rose 28.3% to RM88.4 million, due mainly to higher fair value gain arising from change in interest rate. The investment holding segment registered a loss before tax of RM2.5 million as compared to a loss before tax of RM3.3 million in the preceding quarter ended 31 March 2019 due to lower management expenses in the current quarter.


Table: Allianz's last 8 quarterly results


Graph: Allianz's last 54 quarterly results

Valuation

Allianz (closed RM13.80 yesterday) is now trading at a PE of 11.5 times (based on last 4 quarters' diluted EPS of 120 sen). At this PE, Allianz is deemed fairly attractive.

Technical Outlook

Allianz is in a long-term uptrend line, with support at RM11.80. Its immediate resistance is at the horizontal line at RM14.80.


Chart 1: Allianz's weekly chart as at Aug 23, 2019_10.30am (Source: Malaysiastock.biz)


Chart 2: Allianz's daily chart as at Aug 23, 2019_10.30am (Source: Malaysiastock.biz)

Conclusion

Based on satisfactory financial performance, fairly attractive valuation and positive technical outlook, Allianz remains 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.

SERBADK: Uptrend Continuing

Serba Dinamik Holdings Bhd ("Serbadk") is involved in integrated engineering, contracting and maintenance services. It has wide exposure in the O&G sector. Last week, it announced that it has secured a RM1 billion job in Uzbekistan to build a chlorine processing facility and a 26-MW steam turbine power plant (here). It is valued at an average target price of RM5.65 by Public, Affin, Kenanga & AMInvest.

Yesterday, Serbadk broke above the line connecting its recent highs at RM4.30. This upside breakout signaled the continuation of its prior uptrend. Based on projection, Serbadk may rise to RM5.00.


Chart: Serbadk's daily chart as at August 22, 2019_9.25am (Source: Malaysiastock.biz)

TChong: Earnings Improved due to Favorable Sales Mix

Result Update

For QE30/6/2019, TChong's net profit rose 22% q-o-q or 57% y-o-y to RM19 million while revenue dropped 1% q-o-q or 2% y-o-y to RM1.067 billion. The automotive revenue rose 1.3% y-o-y to RM2,096.6 million and EBITDA rose 46.9% y-o-y to RM149.6 million. Automotive division recorded a 1.3%-decline in revenue to RM1,041.7 million, while EBITDA has improved by 16.2% to RM80.4 million. The lower revenue was due to stiff competition in the automotive market. EBITDA improved due to favorable sales model mix.


Table: TChong's last 8 quarterly results


Graph: TChong's last 49 quarterly results

Financial Position

As at 30/6/2019, TChong's financial position is deemed satisfactory with current ratio at 1.4 times and gearing ratio at 1.0 time.

Valuation

TChong (closed at RM1.45 yesterday) is now trading at a trailing PER of 7.9 times (based on last 4 quarters' EPS of 18.37 sen). At this PER, TChong is trading at a fairly reasonable value for a turnaround stock.

Technical Outlook

TChong appears to be making a base at around RM1.30-1.40. Immediate resistance will be at the psychological RM1.50 mark and thereafter at the horizontal line at RM1.65.


Chart 1: TChong's daily chart as at Aug 20, 2019 (Source: Malaysiastock.biz)


Chart 2: TChong's monthly chart as at Aug 20, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance, satisfactory financial position and fair valuation, TChong could be a good stock for recovery play.

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.

GCB: Earnings Continued to Rise

Results Update

For QE30/6/2019, GCB's net profit rose 15% q-o-q or 42% y-o-y to RM61 million while revenue rose 16% q-o-q or 53% y-o-y to RM753 million. Revenue increased y-o-y mainly due to increase in sales volume of cocoa products while profit before tax rose 42% y-o-y mainly due to higher sales volume achieved.


Table: GCB's last 8 quarterly results


Graph: GCB's last 59 quarterly results

Financial Position

As at 30/6/2019, GCB's financial position is deemed fair while current ratio at 1.4 times and gearing ratio at 1.3 times. The high gearing was due to the suppliers' credit taken to finance purchase of raw material.

Valuation

GCB (closed at RM3.53 yesterday) is now trading at a trailing PER of 7.6 times (based on last 4 quarters' EPS of 46.3 sen). At this PER, GCB is deemed fairly attractive.

Technical Outlook

GCB made a temporary top in April at RM4.24. It then dropped back to find support at the horizontal line at RM3.30. The next support will be from the uptrend line, SS at RM3.10.


Chart : GCB's weekly chart as at Aug 19, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on good financial performance, attractive valuation and positive technical outlook, GCB 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. 

KKB: Strong Earnings Maintained

Result Update

For QE30/6/2019, KKB's net profit rose 76% q-o-q or 215% y-o-y to RM5.6 million while revenue rose 2% q-o-q or 29% y-o-y to RM120 million. The Group's revenue rose y-o-y due mainly to the increased revenue from the Group’s Engineering Sector, in particular, its Civil Construction and Steel Fabrication divisions. Concurrently, the Group’s pre-tax profit rose 219% y-o-y on the back of higher revenue and improved profit margin recognized from the Engineering sector.

Apart from the on-going major Steel Fabrication jobs i.e the D18 Phase 2 Project for the Provision of Engineering, Procurement, Construction, Installation and Commissioning of Wellhead Platforms for Petronas Carigali Sdn Bhd and the Provision of Procurement & Construction of Wellhead Deck, Piles and Conductors for the Pegaga Development Project, the commencement of the two new pipe laying projects secured in February 2019 from Jabatan Bekalan Air Luar Bandar Sarawak (Package SR1 & Package 1C) implemented under the Sarawak Water Supply Grid Program has started to contribute positively to the Group’s revenue and earnings.


Table: KKB's last 8 quarterly result


Graph: KKB's last 48 quarterly result

Financial Position

KKB's financial position as at 30/6/2019 is deemed satisfactory, with current ratio and gearing ratio stood at 2 times and 0.6 times respectively.

Valuation

KKB (closed at RM1.43 yesterday) is now trading at a trailing PER of 16x (based on last 4 quarters' EPS of 9.02 sen). At this PER, Dufu is deemed fair.

Technical Outlook

KKB has broken above its long downtrend in February 2019 at RM1.00.


Chart: KKB's monthly chart as at Aug 15, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance, satisfactory financial position and fair valuation, KKB is still 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.

Market Outlook as at August 14, 2019

Our stock market is getting weaker with each passing day. FBMKLCI is now resting at the horizontal line at 1590. With the downtrend gathering strength (see the rising ADX), this support at 1590 may not hold for long. If this support failed, the index may go down to the next support at the lower line of the wedge, ABCD at 1570. 

Chart 1: FBMKLCI's daily chart as at Aug 13, 2019 (Source: Malaysiastock.biz)

Looking at the weekly chart, we can see that FBMKLCI has been moving downward in a wedge formation, ABCD after making a high of 1896 in April 2018 (at the point marked as "A"). This matched the high recorded in July 2014 (at the point marked as "W"). If the index were to break below the lower line of the wedge, ABCD at 1570, it may go down to test the support at the horizontal line at 1530.


Chart 2: FBMKLCI's weekly chart as at Aug 13, 2019 (Source: Malaysiastock.biz)

We will have to wait and see how the stock market will withstand the fresh round of negative news ranging from the weak economic data to persistent trade war rhetoric. To add to the depressing brew, we have nincompoops for political leaders, here and abroad, that are determined to prove their worth only to their narrow constituencies instead of their entire population. These are the times that try the men's souls.

GenM: RPT Gone Bad!

After the market close on 7 August, GenM announced that it would acquire a 46%-stake in Nasdaq-listed Empire Resorts Inc from its major shareholder at USD128.6 million (or at a price of USD9.74 apiece) (here). 

On 8 August, GenM share price dropped sharply due to concern about this related party transaction. On 9 August, investors began buying into the stock on the hope that GenM would recover after a few quarters down the road.

Yesterday, Empire Resorts share price plunged 12% to close at USD8.18 on news that the company has highlighted to its shareholders that it is contemplating the option of filing for voluntary bankruptcy during the announcement of its result to enable it to easier restructure its borrowings (here). 

To be fair, bankruptcy filings may be a tactical move which savvy investors and companies would employ in order to regulate their affair. However, normal investors are put off by this move which suggests the company's financial condition is quite bad. Even for a well-read person like myself, the move by the major shareholder to tap his listed vehicle for fund to finance its loss-making company in New York is not appropriate. What makes this transaction even worse are:

1. the announcement was not made with full candor regarding the state of financial condition of Empire Resorts; 

2. the shareholders do not have an option to vote on the acquisition as the purchase consideration is below the 5% asset value threshold; and 

3. the purchase price is now higher than the current market price.

As this seemingly unfair transaction will likely affect market perception about the Genting group, I expect the share prices of the group's listed vehicles will trade at a discount for a while until investors have forgotten about their bad experience. For now, I think it is best to avoid this group unless the share prices have dropped significantly enough as to warrant a trading BUY.

Chart 1: Genm's monthly chart as at Aug 13, 2018_12.30 (Source: Malaysiastock.com)


Chart 2: Genting's monthly chart as at Aug 13, 2018_12.30 (Source: Malaysiastock.com)

DUFU: 2Q Earnings Rebounded from 1Q Decline

Result Update

For Q30/6/2019, Dufu's net profit rose 151% q-o-q but dropped 11% y-o-y to RM10.5 million while revenue rose 8% q-o-q but dropped 9% y-o-y to RM53 million. Profit before taxation increased by RM7.7 million or 132% q-o-q mainly due to the increased in revenue, favorable foreign exchange rate and higher production output which has resulted in lower absorption fixed overhead costs in the current financial quarter as compared to the preceding quarter.


Table: Dufu's last 8 quarterly result


Graph: Dufu's last 24 quarterly result

Financial Position

Dufu's financial position as at 30/6/2019 is deemed healthy. Its current ratio and gearing ratio stood at 4.5 times and 0.3 times respectively.

Valuation

Dufu (closed at RM1.88 yesterday) is now trading at a trailing PER of 9.5x (based on last 4 quarters' EPS of 19.83 sen). At this PER, Dufu is deemed fairly attractive.

Technical Outlook

Dufu has been stange-bound between RM1.30 and RM1.95 for the past 7 months.


Chart 1: Dufu's daily chart as at Aug 7, 2019 (Source: Malaysiastock.biz)


Chart 2: Dufu's monthly chart as at Aug 7, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on better financial performance, healthy financial position and fairly attractive valuation, Dufu is still 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.

GENM: Not Another RPT!

GenM announced its acquisition of a 35%-stake in the US-listed Empire Resorts (Code: NYNY) for USD128.6 million. GenM is acquiring the stake from Kien Huat Realty, the main shareholder of GenM's parent company, Genting. Thus, this acquisition will be a related party transaction ("RPT").

Generally speaking investors do not take well to any RPT. What make it even worse is this RPT involved GenM and Genting, which have a history of questionable RPTs. To add another level of suspicion, NYNY is in a loss-making company. How far would the share prices drop? 

If not for the recent good news regarding the resolution of the theme park issue at Resort World in Genting Highland, this negative news could well send the share prices of GenM and Genting to a new low for 2019. However, if we balance out the positive news with the negative RPT news, I think the share prices would be backstopped by the intermediate uptrend line, SS or the low recorded in May this year. Worse comes to worst, the low of December 2018 should be a strong support for both stocks.

Chart 1: GenM's daily chart as at Aug 7, 2019_10.40 (Source: Malaysiastock.biz)

Chart 2: Genting's daily chart as at Aug 7, 2019_10.40 (Source: Malaysiastock.biz)

Chart 3: NYNY's weekly chart as at Aug 6, 2019 (Source: Yahoo Finance)