LATITUD: Earnings rebounded strongly

Result Update

In QE30/9/2020, Latitud's net profit rose 39-fold q-o-q or 99% y-o-y to RM13 million while revenue rose 70% q-o-q or 21% y-o-y to RM235 million. The Group revenue increased by 21% y-o-y mainly attributable to higher sales recorded by furniture plants in Vietnam amounting to RM40.2 million; higher orders received by panel board lamination plant amounting to RM2.7 million; strengthening of US Dollar (“USD”) against Ringgit Malaysia (“RM”) by 0.9%; offset with lower orders received by Thailand sawmill plant amounting to RM1.2 million.

Group PBT increased by more than 100.0% from RM7.9 million mainly attributable to 55.4% increase in gross profit; fair value gain on derivatives of RM0.7 million in QE30/9/2021 compared to fair value loss on derivatives of RM0.3 million in QE30/9/2020; offset with foreign exchange loss of RM2.1 million in QE30/9/2021 compared to foreign exchange gain of RM0.1 million in QE30/9/2020. The substantial increase in gross profit was mainly attributable to the increase in revenue; furniture and sawmill plants recorded higher sales of better margin products; and lower production costs due to higher production output across all divisions.

Table: Latitud's 8 quarterly results


Graph: Latitud's P&L  for last 61 quarterly results

Financial Position

As at 30/9/2020, Latitud's financial position is deemed healthy with current ratio at 2.1x and gearing ratio at 0.5x.

Valuation

Latitud (closed at RM3.94 last Friday) is now trading at a trailing PER of 16 times (based on last 4 quarters' EPS of 24.32 sen). While the PER looks fairly reasonable and possibly fully valued the earnings of the last 4 quarters, it must be pointed out that the recovery in earnings has just begun. If Latitud can achieve the same level of earnings in the next few quarters, similar to QE30/9/2020, then its PER will drop to 7 times. This would make the stock exceptionally attractive.

Technical Outlook

Latitud has broken above its downtrend line RR at RM2.50 in October. Its immediate resistance is at the horizontal line at RM4.00.

Chart: Latitud's monthly chart as atNov 27, 2020 (Source: Malaysiastock.biz)

Conclusion

Based on good financial performance & position, fair valuation and bullish technical outlook, Latitud 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.

KAREX: Time for a Party?

Result Update

For QE30/9/2020, Karex's net profit rose 213% q-o-q to RM4.5 million on the back of a 12%-increase in revenue to RM101.7 million. Compared to the same quarter last year, bottom line has turnaround from a loss of RM167k and revenue was higher by 6%.

Higher revenue was driven by condom sales from the Sexual Wellness segment and record-high contribution from the Medical segment during the quarter. In particular, condom sales to the Americas region in particular continued to expand and contributed positively to the profitability during the current quarter. A favourable sales mix during the quarter coupled with improved cost control initiatives such as incorporation of automation led to better operating efficiency resulting in a profit before tax of RM 7.0 million for the quarter. 


Table: Karex' last 8 quarters' P&L


Graph: Karex' last 28 quarters' P&L

Financial Position

Karex's financial position as at 30/9/2020 is deemed very healthy. Its current ratio stood at 2.3 X while total liabilities to equity stood at only 0.3 X.

Valuation

Karex (closed at RM0.845 yesterday) is now trading at a PER of 176x (based on last 4 quarters' EPS of 0.48 sen). Based on the high PER, Karex is deemed unattractive. However, if the earnings recovery continues, the valuation will be less demanding in the future.

Technical Outlook

Karex appears to have broken above the 2-year base of RM0.30-0.60.

Chart: Karex's weekly chart as at November 24, 2020 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance, healthy financial position, and mildly positive technical outlook, Karex may be a good stock for a recovery play. However, the valuation is very demanding and a big rally will only spring up if earnings improved substantially.

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.

PETGAS: Better Earnings, Lower Prices

Results Update

For QE30/9/2020, Petgas's net profit increased by 8% q-o-q or 37% y-o-y to RM591 million while revenue rose 0.5% q-o-q or 5.2% y-o-y to RM1.407 billion. The Group maintained its strong performance for plant and facilities reliability across all segments during the quarter under review.  Gross profit improved by 9.0% or RM61.0 million to RM735.8 million on the back of lower operating costs by Regasification and Gas Transportation segments mainly due to lower internal gas consumption cost offset by higher repair and maintenance costs. PBT and profit for the quarter were higher by 13.5% or RM96.2 million and 11.5% or RM65.8 million respectively as higher gross profit was supported by higher unrealised foreign exchange gain, negated by lower share of profit from joint venture. During the quarter, the Group recorded higher unrealised foreign exchange gain on translation of USD assets and liabilities totalling RM92.8 million due to strengthening of RM against USD compared to gain of RM20.5 million in the preceding quarter. Lower share of profit was mainly attributable to scheduled shutdown during the quarter at Kimanis Power Sdn Berhad, the Group's 60% joint venture.

Table: Petgas's last 8 quarterly results


Graph: Petgas's last 57 quarterly results

Valuation

Petgas (closed at RM16.32 in the morning session) is now trading at a PE of 18x (based on last 4 quarters' EPS of 91.6 sen). At this PER, Petgas is deemed fairly attractive.

Technical Outlook

Petgas has dropped back to its long-term uptrend line with support at RM15.20.  


Chart: Petgas's monthly chart as at Nov 19, 2020_12.30pm (Source: Malaysiastock.biz)  

Conclusion

Based on satisfactory financial performance, fairly attractive valuation & mildly positive technical outlook, I think Petgas 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.

Happy Deepavali

I like to wish all my readers of the Hindu faith a very HAPPY DEEPAVALI. May the illuminating lights of Diwali guide you in all paths in your life. 

Kossan: Earnings Soared But Share Price Floored

Result Update

For QE30/9/2020 (3Q20), Kossan's net profit rose 166% q-o-q or 6-fold y-o-y to RM349 million while revenue rose 47% q-o-q or 95% y-o-y to RM1.033 billion.

The improved performance was attributable to the improvement in all its three divisions – Gloves, Technical Rubber Products and Cleanroom. The improvement in the Gloves and the Cleanroom divisions were especially significant. To wit:

The Gloves division’s revenue increased 103.24% to RM946.57 million in 3Q20 from RM465.75 million in 3Q19, with PBT rising 670.80% to RM416.65 million in the current quarter as compared with RM54.06 million from a year ago. The improved performance was mainly attributable to the higher volume sold (+34.9%) and higher average selling price as compared with 3Q19.

The Cleanroom division grew revenue and PBT by 118.82% and 1131.80% respectively to RM40.25 million and RM10.19 million in 3Q20, as compared with RM18.40 million and RM0.83 million in 3Q19. The improved performance was mainly attributable to the increase in the demand for the division’s products as a result of the COVID-19 pandemic.

Table: Kossan's last 8 quarterly results

Graph: Kossan's last 56 quarterly results

Financial Position

Kossan's financial position as at 30/9/2020 is deemed healthy with current ratio at 1.7 times while gearing ratio was at 0.6 time.

Valuation

Kossan (closed at RM6.58 yesterday) is now trading at a trailing PE of 13.9 times (based on last 4 quarters' EPS of 47.36 sen). At this PER, Kossan is deemed fairly attractive. In fact, this PE is lower than the PE multiple assigned by the market in 2019. This shows that investors have begun to discount the impact of the vaccine on the future sales of Kossan as well as other glove makers. If the arrival of the vaccines are delayed or the logistics are too daunting, then there is a likelihood that the strong demand for gloves will persist for a while.

Technical Outlook

Kossan is in a long-term uptrend line, SS with support at RM7.00 yesterday. The breakdown of the uptrend line may lead to further decline unless a quick rebound takes place. In September, Kossan broke its uptrend line, SS but it rebounded the next day. We will have to wait and see how Kossan to fare today.


Chart: Kossan's monthly chart as at November 10, 2020 (Source: Malaysiastock.biz)

Conclusion

Despite the developing negative technical outlook, Kossan is a good stock for long-term investment based on good financial performance and financial position and fairly attractive valuation.

Note: 

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

Market Outlook as at November 6, 2020

Last Friday, FBMKLCI broke above its medium-term downtrend line, RR at 1500, and rallied to close at 1520. This rally may continue this week as the world celebrates the return of sanity in America (barely). I expect FBMKLCI to challenge the next 2 resistance levels at the horizontal lines at 1540 & 1590 this week. 

 Chart 1: FBMKLCI's daily chart as at Nov 6, 2020 (Source: Malaysiastock.biz)

The same pattern was witnessed in FBMEMAS, which broke above its medium term downtrend line, RR at 10950 last Friday. It may test its next 2 resistance levels at the horizontal lines at 11050 and 11400.

 Chart 2: FBMEMAS's daily chart as at Nov 6, 2020 (Source: Malaysiastock.biz)

In New York, the MSCI Emerging Market ETF broke above the Jan 2020 high at 46 last Wednesday. It rallied to close the week at 47.93. This bullish breakout may signal the shifting of fund to emerging market as the incoming Biden administration is expected to raise taxes to finance its more progressive fiscal policies. 

Chart 3: EEM's weekly chart as at Nov 6, 2020 (Source: Stockcharts.com)

Based on the above, the market is likely to go higher in the near term. You may buy some beaten down blue chip stocks, such as Tenaga, Airport and Genting, if you want to ride on the expected price recovery. 

Market Outlook as at October 30, 2020

Last Friday, FBMKLCI broke below the support from the horizontal line, AB at 1480. If FBMKLCI does not recover quickly over the next 1-2 day(s), it may continue to slide to the next support at the horizontal line, XY at 1415.

Chart 1: FBMKLCI's daily chart as at Oct 30, 2020 (Source: Malaysiastock.biz)

If we are concerned that the fall in FBMKLCI may be caused by month-end closing shenanigans, then you can take a look at FBMEMAS (below). That index has not broken the line, AB connecting the 2 recent troughs. If FBMEMAS were to break below the AB line at 10600, then it may continue to slide down to the next support at the horizontal line, XY at 9860. 

Chart 2: FBMEMASs daily chart as at Oct 30, 2020 (Source: Malaysiastock.biz)

The non-confirmation from FBMEMAS does not take away from the current precariousness of our stock market. Below are the state of the various sectoral indices in our market:

Sectoral indices that are in a downtrend:

• Transportation: https://www.tradingview.com/x/hkVLUTqT
• Telecommunication: https://www.tradingview.com/x/EROQ1PAr
• Property: https://www.tradingview.com/x/WaJMd5Hf
• Financial Services: https://www.tradingview.com/x/dQ5CuMKL
• Construction: https://www.tradingview.com/x/uetgG9Dj
• Energy: https://www.tradingview.com/x/bJGJmkfi

Sectoral indices that have started their downtrend:

• Plantation: https://www.tradingview.com/x/XfSWq2ry
• Consumer prod: https://www.tradingview.com/x/QHNGkusy

Sectoral index that has peaked:

• Industrial Prod: https://www.tradingview.com/x/rfA5IX8b

Sectoral indices that are still in an uptrend:

• Health care: https://www.tradingview.com/x/iVBlmfhm
• Technology: https://www.tradingview.com/x/XCViBOJb

 Based on the above, we have to be very careful in taking large position in the market. 

Harta: Johnny Come Lately!

Result Update

For QE30/9/2020, Harta's net profit rose 148% q-o-q or 425% y-o-y to RM545 million while revenue rose 46% q-o-q or 90% y-o-y to RM1.346 billion. The higher sales revenue was attributed to higher sales volume and increase in average selling price for the quarter. Profit before tax for the quarter increased by RM 410.1 million or 150.3% y-o-y to RM683.0 million due to increase in sales revenue and better production efficiency.

 
 Table: Harta's last 8 quarterly results


Graph: Harta's last 52 quarterly results

Valuation

Harta (closed at RM18.28 yesterday) is trading at a trailing PER of 62 times (based on last 4 quarters' EPS of 29.47 sen). If we annualized the last 2 quarterly EPS of 22.44 sen to arrive at a full-year EPS of  44.88 sen, then its PER will be lowered to 40.7 times. 

Like in the case of Supermx, we are being too generous in using the annualized EPS of 44.88 sen to compute the PER for Harta as we looked ahead to the normalization of profit due to increased supply of gloves (as a result of increased capacity) as well as lower demand if Covid-19 pandemic were to subside. This will be a tough judgement call for analysts and investors.

Financial Position

As at 30/9/2020, Harta's financial position is deemed healthy with current ratio at 2.63x and gearing ratio at 0.44x.

Corporate Exercise Missing!

Unlike Kossan, Supermx and Topglov, Harta has yet to announce its bonus issue. The timing of that announcement will have a direct impact on the price movement in the near term. I expect a 1-for-1 bonus issue from Harta to be proposed in the next 2-3 months.

Technical Outlook

Harta share price has recently broken its short term uptrend line, S2-S2. The technical outlook for Harta will depend on whether it can surpass the intermediate downtrend line, RR at RM19.00. Until that happens, the near term outlook will likely be a sideways movement. 


Chart 1: Harta's daily chart as atOct 27, 2020 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance, satisfactory financial position and reasonable valuation, I revise Harta's rating to 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.

Supermx: It Gets Better!

 Result Update

For QE30/9/2020, Supermx's net profit rose nearly 100% q-o-q or more than 30 folds y-o-y to RM790 million while revenue rose 46% q-o-q or 266% y-o-y to RM1.352 billion. In the notes to the Financial Statement, the company explained its spectacular financial performance in these words:

"Supermax has again recorded a new record quarterly financial performance, achieving another historical high performance for the 2nd consecutive quarter. Revenue increased to RM1.352 billion from RM369.9 million from the previous year corresponding quarter. This increase translates to a 265.6% or RM982.6 million increase compared to the corresponding quarter a year ago. Profitability also increased sharply with EBITDA, PBT and PAT margins at its highest ever levels of 78.8%, 77.6% and 60.1% respectively. Comparing to the previous year corresponding quarter, the EBITDA, PBT & PAT has increased by 492.5%, 781.8% and 797.0% respectively."

Table : Supermx's last 8 quarters' P&L

Graph: Supermx's last 56 quarters' P&L

Valuation

Supermx (closed at RM9.78 yesterday) is now trading at a PER of 19.7x (based on last 4 quarters' adjusted EPS of 49.74 sen). If we annualized the last 2 quarterly EPS of 46 sen to arrive at a full-year EPS of  92 sen, then its PER will be lowered to 10.6 times. However, I believe to compute PER based on the annualized EPS of 92 sen may be too generous if we looked ahead to the normalization of profit due to increased supply of gloves (as a result of increased capacity) as well as lower demand if Covid-19 pandemic were to subside. This will be a tough judgement call for analysts and investors.

Technical Outlook

Supermx share price is well-supported by the intermediate uptrend line, SS at RM8.80 while the intermediate downtrend line, RR will cap its further upside at RM10.80. Given the strong earnings numbers, I think we may soon see a test of the intermediate downtrend line.

Chart: Supermx's daily chart as at Oct 28, 2020 (Source: Malaysiastock.biz)

Conclusion

Based on excellent financial performance, fairly attractive valuation and still positive technical outlook, Supermx deserved to be upgraded to a BUY.

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.

Glove Stocks: Is That A Temporary Top?

Yesterday, glove stocks dropped sharply. The sell-off came after a 4-day lull in upward price movement for most of the big 4 glove stocks (except for Harta). The price drop yesterday broke the uptrend line in the current rally for most of the glove stocks, which began on 11 September. Unless the share prices can recover above the violated uptrend lines, the glove stocks could well have made a temporary top. 

Chart 1: Harta's daily chart as at Oct 21, 2020 (Source: Malaysiastock.biz)

Chart 2: Kossan's daily chart as at Oct 21, 2020 (Source: Malaysiastock.biz)

Chart 3: Supermx's daily chart as at Oct 21, 2020 (Source: Malaysiastock.biz)

Chart 4: Topglov's daily chart as at Oct 21, 2020 (Source: Malaysiastock.biz)

With increasing news flow of the imminent arrival of vaccines, investors would have to weigh the return from holding onto their glove stocks against the risks that the rally may have peaked. In times like this, investors should consider taking some cash off the table. Redeploying the proceed to some deeply sold-down stocks, like AIRPORT or GENTING, may be a good diversification strategy to benefit from the arrival of the vaccines and the normalization of life as we know. Good luck! 

HTPADU: A bullish breakout

Yesterday, HTPADU broke above the line connecting its recent peaks at RM1.20. The bullish breakout was not accompanied by a huge volume. If the buying support can sustain, the breakout may lead to a new upleg for the stock. Its immediate resistance is its July 2019 high of RM1.45.

The bullish breakout for HTPADU could be due to new development in the award of the immigration job by the government. for more, go here.

 

Chart: HTPADU's daily chart as at Oct 7, 2020 (Source: Malaysiastock.Biz)

Based on the technical breakout, HTPADU could be a good trading BUY.

NTPM: Higher earnings on lower revenue

Result Update

For QE31/7/2020, NTPM's net profit rose 259% q-o-q or 28-fold y-o-y to RM14.6 million while revenue dropped by 11%  q-o-q or 3% y-o-y to RM179 million. Group revenue dropped y-o-y due to the decrease in sales of Tissue paper products. The Group’s PBT increased 527% y-o-y mainly due to the lower raw material cost and overhead cost. The key factors that affect the performance of tissue products include the lower cost in raw material consumed such as virgin pulp and waste paper.

 
Table: NTPM's last 8 quarterly results


Graph: NTPM's last 55 quarterly results

Financial Position

NTPM's financial position as at 31//7/2020 is deemed adequate with current ratio at 0.96 time and total liabilities to total equity at 1.17 times.

Valuation

NTPM (closed at RM0.63 yesterday) is now trading  at a PE of 33.5 times (based on last 4 quarters' EPS of 1.88 sen). At this PER, NTPM is deemed overvalued.

Technical Outlook

NTPM broke above its long-term downtrend line, RR at RM0.40 in September 2019. Due to the sharp selldown in March, the stock revisited the downtrend line again at RM0.32. The 50-week SMA line could be a good support if NTPM share price comes under selling pressure. The breakout of the downtrend line, coupled with the recent upward movement, means that the worst is behind the stock and better days may be here.


Chart 2: NTPM's weekly chart as at Sep 28, 2020 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance and mildly bullish technical outlook, NTPM could be a good stock for recovery play. Its upside potential is still limited due to demanding valuation.

Note:

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

SCGM: Earnings Grew Strongly

Results Update

In QE31/7/2020 (1Q2021), SCGM's net profit rose 20% q-o-q or 276% y-o-y to RM8.3 million while revenue increased 15% q-o-q or 3% y-o-y to RM57 million. The group revenue rose q-o-q due to increase its manpower to 100% from May 2020 onwards under the Conditional Movement Control Order (CMCO), compared to 50% manpower during the Movement Control Order (MCO) from March to April2020. Also, the Group commenced production of face masks in May 2020, which contributed positively to 1Q2021 revenue. The Group recorded 47.8% q-o-q increase in PBT, which is attributable to improved sales mix, lower resin costs and lower interest expense. In line with the increased revenue, the Group noted 20% q-o-q increase in NP, due to the partial utilization of unutilized reinvestment allowance brought forward from prior year, and partial recognition of deferred tax asset on unabsorbed reinvestment allowance previously not recognized.

 
Table: SCGM's last 8 quarterly results

 
Graph: SCGM's last 45 quarterly results

Financial Position

SCGM's financial position is deemed healthy with current ratio at 1.45 times while gearing ratio is elevated at 0.71 time.

Valuation

SCGM (closed at RM3.59 yesterday) is now trading at a PE of 30X (based on the last 4 quarters' EPS of 12.11 sen).  At this PE, SCGM is deemed fully valued.

Technical Outlook

Recently, SCGM broke above its high of RM3.35-3.40 recorded in 2017, and went to a high of RM3.95. 


Chart: SCGM's weekly chart as at Sep 28, 2020 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance, healthy financial position & bullish technical outlook, SCGM is a good stock for long-term investment. However its upside potential may be limited due to its demanding valuation.

Note:

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

Topglov: Exceptional Earnings in an Extraordinary Time

Result Update

On 17 September 2020 (last Thursday), Topglove announced a fantastic set of result for QE31/8/2020, where its revenue increased 161% due to "tremendous growth stemmed from a global surge in demand for gloves on the back of the COVID-19 pandemic". At the same time, its "Profit Before Tax and Profit After Tax surged by 2,095% to RM1.62 billion and 1,692% to RM1.33 billion respectively. Meanwhile, Sales Volume grew by 43% versus 4QFY2019".  

"Reflecting market demand, average selling prices (ASPs) were also adjusted upwards. The Group’s improved profit was also attributed to productivity enhancements which it continued to embark on, while the Group’s utilization levels which remained at close to 100% amplified production efficiency and reaped superior economies of scale. High utilization helped lower overheads significantly, notably the cost of labor and natural gas. Further contributing to the phenomenal results was Aspion with a Profit Before Tax of RM139.9 million, as the Group started to reap the fruits of its acquisition. The additional capacity provided also helped position Top Glove to meet the upturn in glove demand".

 
Table: Topglov's last 8 quarterly results

Like Supermx's result for QE30/6/2020 (here), Topglov's profit margins soared 3-4 folds. This extraordinarily high profit margins is not something that the company would want to trumpet about, probably because it would cause concern among its investors about profit normalization! 

Graph: Topglov's last 72 quarterly results

Business Outlook

Topglov's press release provides some guidance on its bullish outlook in the months ahead. To wit:

The outlook for the company and glove industry remains very promising. With COVID-19, Top Glove estimates that glove demand will grow by 20% per annum in 2020, 25% in 2021 and 15% post-COVID.

The Group’s monthly order book has seen a significant rise of about 150% from pre-COVID days while lead time (delivery) has gone up from about 40 days to as much as about 400 days presently. The exceptionally strong demand coupled with higher ASPs bodes well for the Group’s results in the coming quarters.

Valuation

Topglov (closed at RM8.00 yesterday) is now trading at a trailing PE of 34 times (based on last 4 quarters' EPS of 23.44 sen). At this PE ratio - which is comparable to the multiple assigned by the market in 2019 - investors' perception on Topglov's future earnings is finely balanced between the anticipation for continued sales growth and the concern for the impending sales price (and profit margin) normalization. One of the reason for the scale-down of bullishness in the glove sector is undoubtedly the much-anticipated availability of vaccines for Covid-19 as early as the end of the year.

Technical Outlook

Topglov has peaked at RM9.76 in early August, and then it dropped below its intermediate uptrend line (SS) at RM8.70. A downtrend line (RR) can be drawn on the chart, which will provide resistance to cap any strong rally in weeks or months ahead.

Chart 1: Topglov's weekly chart as at Sep 22, 2020_12.30 (Source: Malaysiastock.biz)


Chart 2: Topglov's semi-log weekly chart as at Sep 22, 2020_11.30 (Source: Malaysiastock.biz)

As noted at the start, Topglov announced its result for QE31/8/2020 on 17 September 2020 (during the lunch break). What happened after the fantastic result was announced was something unexpected- the share price dropped sharply! It should be noted that after Supermx announced its equally fantastic result for QE30/6/2020 on 10 August 2020 (after the market close), its share price opened at higher at RM12.18 the following day and immediately corrected for the next 5 business days to close at RM8.34 on 17 August 2020. We have also observed immediate correction after the announcement of bonus issues for both Supermx and Topglov. These corrections, which followed after the announcement of good news, seem to suggest that there are big sellers waiting to sell into strength for both stocks. Until these sellers have cleared their position, the near term outlook for these stocks is likely to be mildly bearish.

Chart 3: Topglov's 15-min chart as at Sep 22, 2020_11.30 (Source: Malaysiastock.biz)

Conclusion

Based on outstanding financial performance, fairly attractive valuation (on a historical basis) and continued strong demand for its products (due to the persistent rise in Covid-19 cases), Topglov reminds a good stock for medium-term investment. The negative factors to be considered are the big sellers who may cap further rally in the share price and the anticipated arrival of vaccines for Covid-19.

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.

MFCB: Earnings Continued to Rise

Result Update

For QE30/6/2020 (2Q2020). MFCB's net profit rose 41.7% q-o-q or 266.1% y-o-y to RM81.3 million while revenue rose 12.8% q-o-q or 14.0% y-o-y to RM181.3 million. Revenue rose 14.0% y-o-y mainly due to RM130.4 million energy sales revenue (2Q2019: Nil) and higher contribution from Packaging & Labels Division (up 31.0% to RM21.6 million), partially offset by the absence of construction revenue (2Q2019: RM100.2 million) and lower sales reported by the Resources Division on Covid-19 impact (down 30.4% to RM26.6 million). 

Pre-tax profit jumped 224% y-o-y underpinned by a RM93.7 million pre-tax profit from energy sales (2Q2019: RM0.6 million loss) and RM1.7 million contribution from the Packaging & Labels Division (2Q2019: RM0.3 million loss), which more than offset the absence of construction profit in the current quarter (2Q2019: RM26.9 million) and lower profit contribution from the Resources Division.

Profit after tax surged 289% to RM95.3 million (2Q2019: RM24.0 million) on 224% increase in pre-tax profit and lower effective income tax rate. Income from energy sale in Laos is exempted from income tax in its first five years of commercial operations, whereas in 2Q2019, a 20% deferred tax was provided for construction profit during the construction period of the Don Sahong.

  
Table: MFCB's last 8 quarterly results

 
Graph: MFCB's last 28 quarters' P&L  

Financial Position

As at 30 June 2020, MFCB's financial position is weak with current ratio at 0.40 time and total liabilities to total equity at 0.54 time. The extremely low current ratio is a serious concern as the group used short-term borrowings to finance its non-current assets- the bulk of which is likely to be the cost of constructing the 260 MW Don Sahong hydropower project in Laos. 

Valuation

MFCB (closed at RM7.04 yesterday) is now trading at a trailing PER of 12.4x (based on last 4 quarters' EPS of 56.75 sen). At this PER, the stock is deemed fairly valued.

Technical Outlook

MFCB has fully recovered from its sharp selldown in March, which saw the share price plunged to RM3.10. It made an all-time high of RM7.18 in early May and another all-time high of RM7.35 in early August.

 
 Chart: MFCB's weekly chart as at August 19, 2020 (Source: Malaysiastock.biz) 

Conclusion

Albeit its weak financial position, MFCB is a good stock for long-term investment based on good financial performance, fair valuation and positive technical outlook.

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: BENEFITING FROM ALUMINUM PRICE RECOVERY

Results Update

For QE30/6/2020, PMetal's net profit declined by 12% q-o-q or 12% y-o-y to RM90 million while revenue declined by 5% q-o-q or 19% y-o-y to RM1.73 billion.  Profits dropped y-o-y mainly due to the weakening of aluminium price during the current year quarter under review as Covid-19 became a pandemic. In addition, operations at our extrusion and wire rods plants were halted from 18 March 2020 following the nationwide Movement Control Order (MCO). Both plants have since resumed operations by stages from mid-May 2020.

Table: PMetal's last 8 quarterly results


Graph: PMetal's 51 quarterly results

Financial Position

As at 30/6/2020, PMetal's financial position is deemed manageable with current ratio at 1.45 times and total liabilities to total equity at 1.53 times.

Business Expansion

PMetal's new Samalaju Phase 3 is expected to begin operation in early 2021. This will increase PMetals' installed capacity by 42% to 1.08 million MT. 

Aluminum Outlook

Aluminum prices have recovered substantially from its low of USD1450 in May to the current price of USD1780. Aluminum prices have shown a tendency to move in steady trend more than 1 year, and the trend has in the past begun with 10-week SMA line cut above/below the 40-week SMA line as well as the MACD going above/below the zero line. In the last 1-2 weeks, we saw aluminum price exhibiting positive signals, which could be the start of a bullish price trend. 


Chart 1: Aluminium's weekly chart from 2014 to 18 Aug 2020 (Source: Investing.com)

Valuation

PMetal (closed at RM5.04 at end of morning session today) is now trading at a PER of 46 times (based on last 4 quarters' EPS of 11.04 sen). Based on this PER, PMetal is deemed fully valued.

Technical Outlook

PMetal has been drifting lower for the past 2.5 years. A downtrend line, SS can be drawn which has capped the upward movement of the share price. If PMetal can break above the downtrend line at RM5.05-5.10, the share price may go into an uptrend. 


Chart 2: PMetal's weekly chart as at Aug 19, 2020 (Source: Malaysiastock.biz)

I've appended below PMetal share price chart above the aluminum price chart to show the close correlation below the 2 price charts.

Chart 3: PMetal and aluminum's weekly chart from 2014 to August 2020 

Conclusion

Despite the weaker financial performance, full valuation and mildly bearish technical outlook, PMetal is a stock worth considering for long-term investment if aluminum prices were to continue to go higher.  

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 17 August 2020

FBMKLCI has been consolidating since the beginning of August. If we drew a line connecting the low from end March (not mid-March) to date, we can see that this line, SS should provide support to the index at 1545. With both MACD and Directional Movement indicators showing negative reading, the index is not expected to stage a strong rebound from the "uptrend" line, SS in the near term. 

Chart 1: FBMKLCI's daily chart as at 14 Aug 2020 (Source: Malaysiastock.biz)

As noted in the recent market outlook post, our market is driven by 3 big theme plays. The first one is the play or rally on health care stocks (or, more specifically, glove stocks). From Chart 2 below, we can see that this index is likely to correct for a while since its MACD has hooked down.

Chart 2: Health Care Index's daily chart as at 14 Aug 2020 (Source: Malaysiastock.biz)

The second driver is technology stocks. This sector has also hooked down- even attempted to test its "uptrend line" on 12 August. Like health care index, the technology index is expected to remain weak after its MACD has hooked down.

Chart 3: Technology Index's daily chart as at 14 Aug 2020 (Source: Malaysiastock.biz)

The third driver is the droves of retail players getting into the market, probably driven by FOMO or fear of missing out. Many of the latecomers tend to zero in on the cheap stocks, and if we were to extract the total volume from the Top 35 Volume Stocks from 6 August to date, we would get an indication of how much of an impact this buying had on the market. I have tabulated and also plotted a graph of this below. 

Table: Volume of Top 35 Volume Stocks compared to Overall Market Volume from Aug 6 to 14

Graph: Volume of Top 35 Volume Stocks compared to Overall Market Volume from Aug 6 to 14

Since the high volume stocks are generally 3rd liner and fledgling stocks (trading at less than 10 sen each), we can assume that the volume traded represents retail participation. They accounted for a whopping 60-64% of overall market volume on the 2 biggest volume dates in our market to date, i.e. 7 & 11 August. Since then, the volume of the top 35 highest volume stocks had receded. If retail participation stays low, then the market will likely to remain weak for a while.

Based on the above, we should remain cautious and wait out the market correction before taking more aggressive action. Good luck.