MPI may have broken out

MPI has broken above its downtrend line on December 13 last year at the RM10.80 level (see Chart 1). Today, it has surpassed its strong horizontal resistance of RM11.10/20 (which is MPI's last 1 year's high). At 4.00 p.m., MPI was trading at RM11.30. With this latest breakout, I believe MPI is likely to commence its upward move in a more aggressice fashion.



Chart 1: MPI's weekly chart as at Jan 11

A similar development was also observed in Unisem. This stock has broken above its downtrend line at the RM1.65 level on November 10 last year (see Chart 2). Yesterday, it has also broken above its strong horizontal resistance at RM2.08 (also, its last 1 year's high) to close at its high of RM2.17. Today, it continues to go higher & at 4.00 p.m., it was trading at RM2.30.



Chart2: Unisem's weekly chart as at Jan 11

Based on the latest breakout in MPI, I believe that the stock is a good BUY for the medium-term investment as well as for short-term trading.

Sin Chew may have broken above its downtrend

Background

Sin Chew Media Corp Bhd (“Sinchew”) is the publisher of the country’s largest circulated Chinese newspaper, Sin Chew Daily and Guang Ming Daily. The controlling shareholder of Sinchew is Tan Sri Tiong Hiew King, a Sarawak tycoon.

Other information

Recently, Tan Sri Tiong has acquired a 21.01% stake in Nanyang Press Holdings Bhd via Ezywood Options Sdn Bhd. Nanyang has informed that the collective interest of Ezywood and persons acting-in-concert in Nanyang would increase to 44.76% from 23.74%. Nanyang is the publisher of the country’s oldest Chinese newspapers, Nanyang Siang Pau.

Recent Financial Return

Sinchew’s cumulative net profit for the last 4 quarters amounted to RM54.3 mil, which represents a drop of 9.5% as compared to the preceding 4 quarters’ bottomline. During the periods under consideration, its turnover has increased marginally by 2.4% from RM460 mil to RM472 mil.

Valuation

Based on the last 4 quarters' EPS of 18.0 sen & today's closing price of RM2.67, Sinchew is now trading at a PE of 14.8 times. This is almost the fair value by common yardstick. However, I believe Sinchew, like other media stocks, would benefit in the light of the improvement in the economy going forward.

Technical Outlook

From Chart 1, we can see that Sinchew has been in a downtrend since achieving a high of RM3.50 in October 2005. Its recent low was at RM2.50 in September 2006. From Chart 2, we can see that Sinchew had tested that low again in December 2006 & bound back.

A break above the immediate downtrend line at RM2.58/60 would confirm a reversal of the downtrend for the stock. Today, the stock did just that when it went up with good volume & touched a high of RM2.69 before closing at RM2.67. Nevertheless, Sinchew had similar strong upsurges in the past 3 months (all 1-day affairs), which did not sustain. As such, we must track the current move closely & make an entry only if it can sustain for more than 1 day.


Chart 1: Sinchew's weekly chart as at Jan 10


Chart 2: Sinchew's daily chart as at Jan 10

Conclusion

If the current move can sustain for more than one day & the price stays above RM2.60, Sinchew could be a good buy for the medium-term.

TM is testing its short-term uptrend line at RM9.75/80

TM has closed the morning session at RM9.70 . Its short-term uptrend line would be considered broken if the share price closed below the RM9.75/80 level. We can see that the daily MACD indicator has exhibited bearish divergence, which may indicate that the current uptrend for TM is not as strong as many think.

Chart: TM's daily chart as at Jan 10

Maybank is below its short-term uptrend line

Maybank has closed the morning session at RM11.30 (down 30 sen). This means that Maybank has broken below its short-term uptrend line, which has a support at the RM11.40/50 level. It needs to recover quickly or else Maybank's technical outlook would be considered negative.


Chart: Maybank's daily chart as at Jan 10

Hiro may have a bullish breakout at RM1.27

Background

Hirotako (“Hiro”) is involved in the manufacture & sale of automotive parts & components such as seat belts, airbag modules, steering wheels, noise & heat reduction material etc.

Recent Financial Results

Its past 4 quarters’ net profit has improved by 13.3% to RM11.4 mil while the turnover has dropped by 10.0% to RM152 mil. The drop in the topline is attributable to the decline in motor vehicle sales while increased net profit was mainly due to the previous quarters’ net profit being affected by inventory write-offs and provisions for obsolete stocks.

Valuation

Based on the last 4 quarters' EPS of 14.3 sen & yesterday' closing price of RM1.24, Hirotako is now trading at a PE of 8.9 times. At this multiple, Hiro is considered fairly valued for a company involved in the automotive sector, which has seen a sharp drop-off in demand. On the other hand, this demand contraction in 2006 could prepare the ground for a strong recovery in this sector for 2007.

Technical Outlook

The share price of Hiro has been range-bound between RM1.05 & 1.27 (see Chart 1). At about 10.00 a.m., the share price surpassed the RM1.27 level to chalk a high of RM1.30. Hiro is in a short-term uptrend with the support at RM1.18/20 (see Chart 2). If the share can close above RM1.27/30 today, this share is considered to have achieved a breakout of its range on the upside. Thus, it would be considered a buy.

Chart 1: Hiro's weekly chart as at Jan 10


Chart 2: Hiro's daily chart as at Jan 10

Conclusion

Based on possible breakout, Hiro is worth tracking closely. If it can close above RM1.27/30, Hiro would have achieved a bullish breakout. Failing which, it may retrace back to test its short-term uptrend line at RM1.18/20. The latter would be a safe level to gain entry to Hiro if you have the patient to hold. Fundamentally, Hiro is considered fairly priced at the current level.

Lion Diversified tested its uptrend line support of RM5.45

Lion Diversified was in the headline on & off for the past 6 months since its subsidiary, Parkson Retail Group Ltd was listed on the Main Board of the Hong Kong Stock Exchange. From a low of RM3.70 on June 14, 2006, Lion Diversified share price rose to a high of RM6.70 on December 1, 2006. Thereafter, the share price started to correct some of its gain. On January 8 (two days ago), the share tested its immediate uptrend line (aa) at the RM5.80 level but the share failed to re-bound convincingly. Today, it has broken below this uptrend line (aa) as well as tested its next uptrend line (AA) at the RM5.45 level at 3.15 p.m. The RM5.45 level is also a strong horizontal support level. There is a good chance that this stock may rebound from here.

Lion Diversified could be a good trading candidate. Nevertheless, you need to put a protective stop at RM5.30 (i.e. 3% below the immediate support) in case the share were to drop & break through the current uptrend line (AA) at the RM5.45 level. On a upswing, this share may hit RM6.00/20.


Chart: Lion Diversified's daily chart as at January 9

Maemode is testing its uptrend line at RM1.12

Background

Malaysia AE Models (“Maemode”) is involved in the designing, manufacturing, installation and marketing of material handling and conveyor systems and parts.

Recent Financial Results

Based on the last 4 quarters’ results, Maemode chalked up a net profit of RM13.6 mil on a turnover of RM309 mil. This represents an increase of 47% & 60% respectively over the topline & bottomline of the preceding 4 quarters.

However, it is noted that the current quarter’s performance has dropped when compared to the preceding quarter. Net profit has declined by 23% while turnover has dropped by 39%. This is likely to be attributable to the completion of a big contract in the preceding quarter.



Valuation

Based on the closing price of RM1.13 as at today & the EPS of 14.3 sen for the last 4 quarters, Maemode is now trading at a PE of 7.9 times. At this multiple, Maemode is still an attractive buy.

Technical Outlook

The share price has corrected some of its recent gains. Today, the share has actually tested the uptrend line at the RM1.12 level. We can see that the share also has some horizontal supports at RM1.13 & RM1.10. This could be a good entry level for Maemode.


Chart: Maemode's daily chart as at Jan 8

Conclusion

Based on undemanding valuation & nice technical set-up, Maemode could be a good investment.

ZA-OSKSB could yield 8.0% return for less than 2 months' holding

ZA-OSKSB is a cash-settled zero-strike basket call warrant (“Basket CW”) that gives the holder an exposure to a basket of 20 blue chip shares. The issuer, OSK has recently modified the mode of exercise of the Basket CW from a cash-settled European style of exercise to a cash-settled Bermudan style of exercise. After the modification, the Basket CW can be exercised on 4 days in a year as compared to being exercisable only on its expiry date. The Exercise Dates of the Basket CW shall be 28th February, 29th May, 29th August and 29th November of each year, and the last Exercise Date shall be the Expiry Date.

The effect of this modification is the exercise of 17,200,000 units of the Basket CW on the first Exercise Date on 29^th November 2006. As a result thereof, the outstanding Basket CW is 3,300,000.

The next Exercise Date will be on 28th February, which is about 50 days away. If you buy ZA-OSKSB at yesterday’s closing price of RM1.08 & exercise it on 28th February, you are likely to get at least capital gain of 8.0%, assuming the component stocks in the basket can maintain at yesterday’s closing prices. As at yesterday, the underlying value of each ZA-OSKSB is RM1.1735 (see the table below) while being traded at only RM1.08. Given the current bullish sentiment in the stock market, I would rate the chances of ZA-OSKSB maintaining its underlying value at RM1.1735 to be very good. In fact, I would not be surprise if the underlying value could be higher than RM1.1735 on the Exercise Date of 28th February.

MAA deserves a close watch

I’ve recommended a BUY on MAA on December 4, 2006 when the share was trading at RM1.82. It had then gone up to a high of RM2.00 before dropping back to a low of RM1.70. This stock is worth watching in the near term because I believe it may be poised for another upswing. If the stock can break above RM1.83/85, the upswing would have started. This round the stock may go as high as RM2.30 to 2.50. On the other hand, the stock may consolidate a bit longer. In which case, its support would be at the RM1.73/75 level.

So, you can buy MAA on the breakout level of RM1.83/85 or, on weakness, at the RM1.73/75 level.

Chart: MAA's daily chart as at Jan 8

US markets are at the crossroad

The US markets are at the crossroad with the Nasdaq index having broken its uptrend line in mid-December 2006 (see Chart 1). Despite the break, Nasdaq has not fallen but it has instead stayed above the 2,400 level. This means that the Nasdaq index has been moving sideway for the past 3 weeks.

The other main indices are all at their uptrend lines. These are the blue chips-laden DJIA (Chart 2), the broader market barometer, S&P500 (Chart 3) and the small-cap, Russell 2000 (Chart 4).


Chart 1: Nasdaq's daily chart as at Jan 5, 2007



Chart 2: DJIA's daily chart as at Jan 5, 2007



Chart 3: S&P500's daily chart as at Jan 5, 2007



Chart 4: Russell 2000's daily chart as at Jan 5, 2007

Stock markets throughout the world will be watching the US markets for clue of the direction of equity markets as a whole. While many expects the Asian markets to benefit from weakness in the US markets, a sharp fall in the US will likely to produce a knee-jerk reaction that can be very painful for traders. The Malaysian stock market will not be an exception & until a favorable outcome is at hand, we can expect trading to be volatile & directionless.

CI may take a short breather

On January 3, the CI had surpassed its recent high of 1110 achieved on December 11 last year. It did so & closed at its high of 1117 on that day. Is the market going to continue to go up from hereon? Over the next few days, the market shall provide the answer to that question.

If the CI were to break below the short-term uptrend line (aa) at 1112 level as well as the previous high of 1110, chances are the market will correct further. The support level for such a correction will be at the horizontal support level of 1085 or the medium-term uptrend line support of 1080. The formation of a pattern such as a rising wedge is possible.

Chart: CI's daily chart as at Jan 8, 2007

RUBhd may be ripe for some profit-taking

RUBhd's share price has risen quite significantly after my second BUY call on the stock on November 22 when it was trading at RM1.56. The share closed at RM2.91 last Friday (January 5).

At that price, RUBhd was resting on its short-term uptrend line (with support at RM2.90). This morning, RUBhd has broken below this uptrend line. At 10.00 a.m., the share was trading at RM2.79/80. Unless the share price rebounds soon, the stock would have broken its uptrend line & the short-term outlook would turn negative. It is important to note that the daily MACD has exhibited bearish divergence which may signal the breaking of the uptrend line (as mentioned earlier). As such, some profit-taking at this level would be recommended while we await a confirmation over the next day or so.

Chart: RUBhd's daily chart as at Jan 5

Courts has broken out again...

From Chart 1, we can see that Courts has broken out of its flag formation on the upside at RM0.73 yesterday (January 3). With this breakout, Courts is likely to resume its prior uptrend (or, upward movement).

In addition, Courts has also broken above its medium-term downtrend at the RM0.75 level (see Chart 2). With this, the worst is likely to be over as the stock will either drift sideway or, as noted above, resume its uptrend.

Before taking a plunge into this stock, I must warn of a not-so-present fact. One of the big sellers of Courts shares for the past few weeks has been EPF (or, an EPF-owned fund). Based on the latest announcement, EPF still has 21.2 million Courts shares (representing 7.5% of Courts’ outstanding shares of 282 million). We won’t know how much of these shares are up for sale nor why EPF wants to sell this stock despite a potential General Offer at a price likely to be higher than what it can obtain by selling in the open market. If this selling persists, the stock’s upside potential would be limited. The contrarian may beg to differ.

Chart 1: Courts' daily chart as at Jan 3, 2007


Chart 2: Courts' weekly chart as at Jan 3, 2007

I believe that the future performance of Courts share price will be closely tied to the outcome of the sale of Courts plc's majority stake in Courts. The latest update for the month of November last year has been posted on Courts plc's website. Due to downturn in Courts' financial performance & the need to secure new credit facilities to replace existing facilities (which expired on December 2006) , the focus of bidders has moved from completing the acquisition of Courts to "a hold pattern awaiting more up to date information to reassure them that the current levels of operational performance are improving rather than declining." The timeline for the completion of the sale of Courts has now moved to early 2007. This delay could be one of the reasons why EPF has decided to reduce its position in Courts.

So, we may be tempted to gain entry into Courts based on its bullish breakout but we should also take note that the desired outcome i.e. the sale of Courts plc's stake in Courts might not happen soon. This coupled with the new supply of shares from EPF's selling might cap the upside of this stock.

Megan reported improved net profit in QE31/10/06

Background

I've posted on Megan twice in August 2006 (here & here). The group is involved in the manufacture & sale of CDs, DVDs & video tapes. Its recent financial performance was affected by intense competition from manufacturers in China & Taiwan.

Recent Financial Results

However, we can see that the group's net profit has increased in QE31/10/06 by 12.8% q-o-q to RM15.2 mil from RM13.4 mil in QE31/7/06. This was achieved on the back of a marginal 3.5% increase in turnover from RM230 mil to RM238 mil. Its EPS has also increased from 6.6 sen to 7.5 sen during the period. As such, its first half 2007 EPS amounts to 14.0 sen.



Valuation

Based on yesterday's closing price of RM0.66 & an annualized EPS of 28 sen, Megan is now trading at a PE of 2.4 times. This is a cheap stock that has factored in a lot of risks.

Technical Outlook

Technically, the stock is still in a bottoming-out process. A breakout may be at hand since the share closed at RM0.66 level, yesterday. This level was however surpassed once in end November & early December last year but it failed at the RM0.70 level. I think a break above RM0.70 is required to convince technicians about the stock's upside potential.


Chart 1: Megan's daily chart as at Jan 3, 2007


Chart 2: Megan's weekly chart as at Jan 3, 2007

Conclusion

Based on cheap valuation & potential technical breakout, Megan is a stock worth tracking or even buying at current level.

BLD Plantation had a breakout and a new high

Background

BLD Plantation ("BLD") is a Sarawak-based oil palm company. It has 53,000 hectares of plantation land; of which 24,700 hectares had been planted with oil palm. 10,000 hectares of the planted area are matured.

Recent Financial Results

BLD's latest 4 quarters' cumulative net profit amounted to RM14.0 mil, representing a drop of 50.4% as compared to the preceding 4 quarters. This is despite a 11.8%-increase in turnover from RM122.6 mil to RM137.0 mil. The poorer results was attributed to lower prices of CPO and increased operating cost. Also, it is noted that BLD's net profit for the earlier period has been boosted by a tax credit of RM3.1 mil in QE31/12/05.



Valuation

Based on the latest 4 quarterly EPS of 16.5 sen & the price of RM2.92 as at 3.30 p.m. today, BLD is trading at a PE of 17.7 times. Given the recovery in the prices of CPO in the past few months that may be reflected soon in its financial result, BLD's EPS & PE should subsequently improve.

Technical Outlook

BLD did a breakout above the strong horizontal resistance of RM2.50 on the last day of 2006. This level is also the recent high for the stock. A break above a recent high is normally a very bullish event & I expect the stock to rise further. Admittedly, the current price is lot higher than the breakout level, which makes buying difficult as the reward & risk may not be in your favor. If so, you may want to wait for the stock to pull back a bit before making an entry.

Chart 1: BLD's daily chart as at Dec 29, 2006


Chart 2: BLD's weekly chart as at Dec 29, 2006

Conclusion

Based on good technical outlook & improving fundamental, I believe BLD would be a good buy for the medium-term. However, you may want to wait for the price to ease back a bit before making an entry.

Charting for everyone

I've received many requests for assistance on charting matters. The requests normally fall into two categories; one is charting knowledge and the other is the source for charts on shares listed on Bursa Malaysia. On the former, I think that one very good source is the Chart School provided by StockCharts.com. Of course you can go out and buy some books on technical analysis written by authors such as John Murphy etc. On the source of charts, I believe that one of the very good website that you can get free charts is TradeSignum.com (go here for the free charts). Alternatively, you can buy a charting software (such as Metastock etc) & then, subscribe for the data.

With this post, I shall be take my leave until 2007. I must say that 2006 has been a good year for me for business reasons as well as personal development. One of the best thing that has happened is the starting of this blog, which has been a very enjoyable & rewarding experiment for me. When I first started blogging in last July, I thought I would not be able to sustain for more than a few weeks. Six months down the road, I am still at it. The excitement of spotting a good stock or sector or calling a reversal in the market; that will drive me on. It is not an easy task to blog and still carry on my stockbroking/dealing job at the same time. If the dealing is too hectic, the blogging will have to wait. As such, you may find a post that is slightly late. Well, that's the limitation that I've lived with for now.

2007 is likely to be a very exciting year for Malaysian stocks. We must take our chances when the opportunity comes along and I believe that 2007 is a good time for equity. With each trade, we must weigh the reward & the risk carefully. In trading as in investing, commitment is everything. By commitment, I meant the acceptance of the risk that goes hand in hand with the reward that you hope for. There will be losses as much as there will be gains. If a trade goes against you, you need to take the loss and move on. The market in 2007 will test your mettle as a trader because the prices will likely to be much higher than now. If the market were to do a major top after a long run-up, there is only one thing to do. Sell quickly when the time comes. Until then, you must stay sharp & focused.

That's all for now. I wish you all a very Happy New Year.

Call Warrant updates

Those, who has been following my Call Warrants Updates, would have noticed that the last update was on December 18. I've discovered a good place to obtain call warrants' pricing/premium computation at OSK188.com. You can check out this source by going to this link (here).

OSK188.com provides a Structured Warrant Pricing Table, which is updated quite regularly. The December 28 table is reproduced below. I've highlighted those call warrants with premium less than 5% (in yellow) as well as those expiring in January 2007 (in blue) & 3 months thereafter (in green).



One thing that you may notice is that the table also distinguishes those call warrants which are physically settled from those which are cash-settled. The former is denoted with a "#". The holder of this type of call warrants will have to subscribe for the share & take physical delivery of the share. You may remember that I've pointed out that MPLant-CA was the first call warrant to fall into this category. Now, I've discovered that there are more of such call warrants then I've earlier thought.

Finally, the table also covers the 2 basket call warrants listed on Bursa i.e. ZA-OSKSB & ZA-CIMBB. I shall touch on these 2 instruments in the future.

Market Outlook as at December 27

Ten days after the market has made a temporary top, there are tentative signs that the worst is now behind us. You can see from the 3 charts below- the daily charts for CI, Mesdaq & Second Board- that their short-term downtrend lines (marked as 'BB') have now been overcome. These indices have tested their medium-term uptrend lines and survived, except for the Mesdaq index.

The breaking of the short-term downtrend lines should turn the prevailing bearish mode to a neutral mode as the market begin to find its footing. We are likely to see the formation of a pattern (such as a triangle) and then we shall await the upside breakout of this pattern (thus turning it into a continuing pattern). Thereafter, the market would continue with its prior trend, which was an uptrend. That's the idea... but we all know that the market seldom behave as you expect. We must take the market as it comes.

With that scenario in mind, the next course of action is to "lose our cash". In another word, let's put our cash into stocks.


Chart 1: CI's daily chart as at Dec 27


Chart 2: Mesdaq's daily chart as at Dec 27


Chart 3: Second Board's daily chart as at Dec 27

NTPM has a bullish breakout at RM0.36

Background

NTPM is involved in the manufacture of toilet & tissue paper as well as sanitary products.

Recent Financial Results

NTPM's results for the last 4 quarters are significantly better than those achieved in the preceding 4 quarters. Its net profit for the last 4 quarters amounted to RM31.5 mil, which is 51.6% higher than the preceding 4 quarters while turnover increased by 15.4% to RM256.7 mi from RM222.4 mil.

The improvement in the current quarter is even more encouraging. For QE31/10/06, its net profit increased 8.3% y-o-y or 69.4% q-o-q to RM8.4 mil. Turnover has also increased by 3.4% q-o-q or 15.7% y-o-y to RM67.6 mil.



Valuation

Based on the last 4 quarters' cumulative EPS of 5.0 sen and its closing price of RM0.37, NTPM is now trading at a PE of 7.4 times. At this PE multiple, I believe NTPM is still inexpensive given its steady growth and exposure to the stable consumer sector.

Technical Outlook

NTPM has broken above its downtrend line in the w/e Feb 17 at the RM0.30 level. Since the breakout, the share has been trading in an ascending triangle pattern with the resistance at RM0.36 level. Today, NTPM has finally broken above the RM0.36 level & closed at RM0.37. Volume accompanying the breakout is quite heavy.

Chart: NTPM's weekly chart as at Dec 27

Conclusion

Based on improving financial performance & technical bullish breakout, NTPM is a good stock for medium-term investment.

TSH has a bullish breakout at RM1.45

Background

TSH is involved in 3 businesses i.e. palm & bio-integration; wood products manufacturing; and, cocoa & vegetable fats manufacturing. The wood products manufacturing is carried on by its 65%-owned subsidiary, Ekowood International Bhd. The latter is a public company listed on Bursa Malaysia.

Recent Financial Results

TSH's financial results has shown some recovery in the last 2 quarters (i.e. QE Sep 30, 2006 & QE Jun 30, 2006) after its net profit was eroded in the preceding 2 quarters (i.e. QE Mar 31, 2006 & QE Dec 31, 2005) by the decline in crude palm oil price and the lower margin of the wood and cocoa business segments. Its net profit increased by 36.4% y-o-y to RM12.2 mil on the back of a 9.6%-increase in turnover. When compared to the immediately preceding quarter, TSH's net profit has dropped by 9.8% while turnover was 4.3% lower.



Valuation

Based on its last 4 quarters' cumulative EPS of 9.29 sen & its closing price of RM1.53 today (December 28), TSH is trading at a PE of 16.5 times. At this PE, one can say that TSH is trading at its fair value. Nonetheless, we notice that TSH's main businesses have shown steady improvement of late, which will translate to btter margin for TSH going forward. As such, it is likely that its EPS for FY2007 will be higher.

Technical Outlook

TSH has broken above its downtrend line in the w/e Sep 22 at the RM1.40 level. Since then, the share has been trading in range between RM1.15 & 1.45. On December 27, TSH has broken above this range. This could signal the beginning of an upside move for TSH.

Chart: TSH's weekly chart as at December 27

Conclusion

Based on good technical set-up & improving business outlook, TSH could be a good stock for medium investment.