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Monday, July 06, 2015

Market Outlook as at July 6, 2015

The Wall Street Journal reported on July 2 (last Thursday) that Malaysian investigators have found almost US$700 million (RM2.6 billion) of 1MDB's funds have been deposited into Prime Minister Datuk Seri Najib Razak's personal bank accounts in AM Islamic Bank. Like all Malaysians, I was totally aghast by the allegation in this report. I have been waiting for a strong denial from the Prime Minister and further strong actions, such as a suit against Wall Street Journal, to prove his innocence. Alas, as at this morning, none of these simple acts were carried out by the Prime Minister.

The Prime Minister did promise that he would not betray Malaysians; that he did not make any personal gain; and that he may sue Wall Street Journal for the allegations. The most curious statement made was that he would not put the money in Malaysia if he had stolen it. All of these statements are lame. They are simply not enough!

Malaysians are still waiting. We deserve a complete answer from the Prime Minister. I am very surprise that the easiest way to refute this allegation (or, at least put a stop to the snowballing crisis of confidence)- by getting AM Islamic Bank to confirm that these transfer of funds did not take place- is still left hanging in the air. If we feel that this confirmation alone is not enough, surely we can get Bank Negara to reconfirm this statement from AM Islamic Bank. If the easiest route is not explored, then my concern is that the case is not straightforward. That may explain the obfuscations and accusations that we have heard & read about over the weekend.

It is indeed a very sad day for our Prime Minister- a leader who started out as a promising transformer, only to be withered down to be yet another transitioner under relentless political attack (which he may or may not deserve). For the sake of the nation, I sincerely hope that our Prime Minister can clear his name. Until then, he must put the interest of the nation ahead of his personal interest and his party's interest. He can do so by taking a temporary leave of absence while the organs of the state work to disprove the allegation against him. He must not fall for the sweet talks from his party supporters that the onus is on the accusers to prove the allegation. To rely on legalistic arguments would only diminish the office of the Prime Minister. Anyway I am sure our Prime Minister would not want to lead the nation under a cloud of suspicion. The sooner this allegation is resolved, the better it is for him, his party and the nation.

Meanwhile the market is down about 22 points as at 11.00am. We are hanging onto the support of the overturned downtrend line, RR at 1705. A break below this sliding support would trigger further selling and the renewal of the downtrend. In this dark times, we must exercise caution in the market by avoiding excessive trading position. Good luck!


Chart: FBMKLCI's daily chart as at July 7, 2015_10.00am (Source: ShareInvestor.com)

Friday, July 03, 2015

Masteel: A small loss...

Results Update

Masteel has released its quarterly results for QE31/3/2015. Its  revenue dropped by RM66.78  million  to RM325.39 million mainly due to lower selling price and sales volume. It recorded a loss before tax of RM9.90 million as compared to profit before tax of RM6.19 million achieved in QE31/12/2014 due to lower profit margin.


Diagram 1: Masteel's 11 quarters' PL & CF (Source: ShareInvestor.com)


Chart 1: Masteel's 11 quarters' PL & CF (Source: ShareInvestor.com)

Financial Position as at 31/3/2015

Masteel has adequate liquidity as reflected by its current ratio of 1.16X. Its leverage is elevated as with gearing ratio at 0.93X. Debtors' & Inventory Turnover periods stood at 47 & 99 days, respectively.

Looking at the Balance Sheet, we can see a big swing in the Debtors & Inventory numbers. This is likely due to changes in accounting treatment requested by external auditor. More on the external auditor's concern below.

 
Table 1: Masteel's Balance Sheet as at 31/12/2014 & 31/12/2009

Qualification of Audited Account for FY2014

Masteel has filed in its audited financial statements for FY2014 (here). Its external auditor, Nexia SSY qualified Masteel's accounts for FY2014 due to 2 main concerns:

(a) Classification: The treatment/ classification of an amount due to a multinational commodity trader as at 31 December 2014 as Trade Deposit for purchase orders that were continuously cancelled. These deposits should be treated as financing arrangement. 

(b) Validity and Recoverability: The recoverability of the balances from certain trade debtors where credit entries and other adjustments were made to offset amount owing by these debtors against amount owing to the same parties (for purchases of steel products). In addition, this adjustment may lead to specific misstatements in the financial statements.
Subsequently, Masteel has appointed UHY carry out a Special Audit Report to address the concern of Nexia SSY. UHY’s findings are:

(a) Classification: UHY was satisfied that the advance payments received from the aforesaid multinational commodity trader had been correctly accounted for by the Company as trade deposits in accordance with the Malaysian Financial Reporting Standards.

(b) Validity and Recoverability: UHY was satisfied that the transactions with the trade debtors under review are properly supported evidentially. UHY has also ascertained with reference to events post 31 December 2014 that the amounts due from the trade debtors under review have been fully repaid and/or settled in accordance with the agreed trade credit terms.
After this unpleasant episode, Nexia SSY did the obvious thing of seeking reappointment as external auditors of the Company. To Masteel, the damage has already been done. It will take a long while before the stock will ever be treated without suspicion again.

Technical Outlook

Masteel's share prices dropped sharply after the announcement of the external auditor's reservation about the account in late April. Masteel ceased trading on May 11. This has certainly spared the share further selling due to recent market upheaval. When Masteel finally reopens for trading, it would retest the horizontal support at RM0.60 again. Will that support hold up the stock? We will have to wait & see.


Chart 2: Masteel's monthly chart as at Jul 2, 2015 (Source: ShareInvestor.com)

Conclusion

Due to the poor industrial outlook for steel sector plus the cloud of uncertainty surrounding this stock, Masteel is likely to remain weak for the while. The share price has dropped significantly but so did many other steel stocks. Masteel is neither cheaper nor more attractive than its peer. Based on this, it is best to avoid this stock for now.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Masteel.

SSEC: Further Downside Ahead

This morning, SSEC broke through the horizontal support of 3900 - a minor technical support which barely held up yesterday. See Chart 1.

 
Chart 1: SSEC's intraday chart as at Jul 3, 2015_10.16pm EDT (Source: Yahoo Finance)

With the technical breakdown, SSEC is likely to careen down to its next support at 3400 and, below that, 3000. Both of these 2 support levels are very strong and I believe one of them should be the resting place for the current downtrend. If the index finds the support at the 3000 psychological level, then the long-term uptrend line, SS will remain intact. The market will still have a decent chance of recuperating and come back another day.


Chart 2: SSEC's daily chart as at Jul 2, 2015 (Source: Stockcharts)

Wednesday, July 01, 2015

Cypark: Top-line & bottom-line improved

Result Update

For QE30/4/2015, Cypark's net profit dropped 70% q-o-q or 7% y-o-y to RM14.5 million while revenue increased by 22% q-o-q or 6% y-o-y to RM73 million. Revenue increased q-o-q mainly contributed by the increase in sale of renewable energy due to better weather and the commencement of the Phase 2 works of the environmental engineering project. Pre-tax profit also increased by 66% q-o-q due to higher revenue generated and savings achieved in finance costs in current quarter as compared to the immediate preceding quarter.


 Table: Cypark's last 8 quarterly results


Chart 1: Cypark's last 20 quarterly results

Financial Position

Cypark's financial position has improved with continuous capital raising exercise (here). This has increased the number of shares outstanding to 100.7 million from 90.3 million a year ago. The result of this exercise is that the gearing ratio dropped 1.1 times to 0.9 time. Current ratioimproved marginally to 1.1 times.

Valuation

Cypark (closed at RM1.69 yesterday) is now trading at a PE of 7.8 times (based on last 4 quarters' EPS of 22 sen). At this multiple, Cypark is deemed attractively valued.

Technical Outlook

Cypark is trapped within a large triangle formation. A few weeks ago, it broke to the downside of the triangle (below RM1.70), which is a bearish development. However, it has since climbed back within the triangle. Until it has broken out of this triangle, the stock will likely trade between RM1.70 & RM3.00.


Chart 2: Cypark's weekly chart as at June 30, 2015 (Source: ShareInvestor.com)

Conclusion

Despite the good financial performance & attractive valuation, Cypark is still rated a BUY.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Cypark.

Market Outlook as at July 1, 2015 (UPDATED)

Our market is reacting positively to the news of Fitch revising our outlook back to stable (here). FBMKLCI, which was up 14.7 points, rose 28.0 points as at 10.30am.

Chartwise, FBMKLCI broke above the intermediate downtrend line, RR at 1720. This breakout signals a possible end of the current downtrend. The index could potentially rally to test the horizontal lines at 1650 1750 & 1680 1780.

Looking back, I must say that the potential for a rebound was foretold by the twin divergence in shown by MACD & Slow Stochastic. I hope that the recovery will continue to broaden out. The damage to the broader market has been severe and that will take time to recover. Can this happen with the tumultuous development in Greece and the volatility in Shanghai? Let's wait & see.


Chart: FBMKLCI's daily chart as at July 1, 2015_10.15am (Source: ShareInvestor.com)

Tuesday, June 30, 2015

Scientx: Top-line & bottom-line continued to rise

Result Update

For QE30/4/2015, Scientx's net profit  increased by 19% q-o-q or 18% y-o-y to RM43 million while revenue was mixed- dropped 2 %q-o-q but rose 7% y-o-y to RM455 million. Revenue dropped q-o-q due to 3% decline in revenue from the manufacturing division.Net profit rose due to higher profit from the manufacturing division (mainly due to higher profit margin) and from the property division (due to marginal increase in revenue & profit margin). Finally, bottom-line was boosted by lower forex losses.


Table 1: Scientex's last 8 quarterly results


Table 2: Scientex's segmental results


Chart 1: Scientex's last 39 quarterly results

Valuation

Scientex (closed at RM6.76 yesterday) is now trading at a trailing PE of 9.5 times (based on last 4 quarters' EPS of 71 sen). With strong growth of about 20% in the last 4 quarters, Scientx is an attractive growth stock with PEG ratio is about 0.5 time only.

Technical Outlook

Scientx has been in an uptrend, guided by the 10 & 21-month SMA line. With the MACD falling below the MACD Signal line, we can expect the share price to consolidate for a while. This consolidation may bring the share price to the 21-month SMA line at RM6.30-6.50.


Chart 2: Scientex's weekly chart as at Jun 29, 2015 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance, attractive valuation & positive technical outlook, Scientex remains a good stock for medium to long-term investment.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Scientex.

Market Outlook as at June 30, 2015

Yesterday, our stock market was badly hit by another down day in Shanghai & Greece's imminent default on its IMF debt payment. FBMKLCI lost nearly 19 points to close at 1692. In the process, FBMKLCI broke the psychological support of 1700. What is standing in the way of a sharp plunge is the less-than-impressive support from the line connecting the low of August 2013 & December 2014 (AB) at 1675. Look at the weekly Chart 1.


Chart 1: FBMKLCI's weekly chart as at June 29, 2015 (Source: ShareInvestor.com)

From the monthly Chart 2, we can see that the bearish reading from price action, overlays and indicators (as noted previously) remain in place. Investors & punters are now confronted with a falling market and the uncomfortable question: Will it be a mild drop like 2000 or a sharp one like 1997 or 2008? Only time will tell.


Chart 2: FBMKLCI's monthly chart as at June 29, 2015 (Source: ShareInvestor.com)

Friday, June 26, 2015

CHINA50 Put Warrants: Pricey Options

How do we play the downside move in SSEC Index? One way is to buy CHINA50 put warrants. There are six of them trading in our exchange- from CHINA50-H1 to CHINA50-H6. However it must be noted that CHINA50 index is not the same as SSEC Index. The constituent stocks for SSEC Index (from Wikipedia) & CHINA50 (from FTSE) are listed below..


Table 1: Constituent stocks of SSEC & CHINA A50

We can see below that CHINA50 has been generally rising since October last year. However, it has been dropping in the past 2 months. and it is now testing its uptrend line, SS at 12650.


Chart: CHINA A50's daily chart as at June 25, 2015 (Source: Investing.com)

The list of CHINA A50 put & call warrants are listed below. A quick glance will reveal that these warrants have very high premium. Thus, there are fairly risky.


Table 2: CHINA A50 Put & Call Valuation

Based on high premium, I would advise against trading any of the put warrants of CHINA A50 unless you are a seasoned trader.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, any of the indices or instruments mentioned in this post.

Shanghai's SSEC: Temporary Top Confirmed!

Shanghai's SSEC Index dropped today, unable to climb back up above the violated accelerated uptrend line, S2-S2. See Chart 1 & 2.


Chart 1: SSEC's daily chart as at Jun 25, 2015 (Source: Stockcharts)


Chart 2: SSEC's daily chart as at Jun 25, 2015 (Source: Stockcharts)

From the intraday chart as at 2.06pm, we can see that SSEC Index is now trading below its low as at June 23 (Tuesday). This means that SSEC Index is now breaking below the S1-S1 line. Please refer back to the above 2 charts.


Chart 3: SSEC's intraday chart as at Jun 26, 2015 (Source: Yahoo Finance)

From the above study, I think SSEC Index -barring a sudden recovery to stay above the S1-S1 uptrend line- is set up for further downside move. The temporary top (for now) is baked into the chart.  

AEONCR: Top-line & bottom-line rose marginally

Result Update

For QE31/5/2015, AEONCR's net profit dropped 5% q-o-q or 3% y-o-y to RM58 million while revenue was up 3% q-o-qor 16% y-o-y to RM232 million. Pre-tax profit for QE31/5//2015 improved marginally by 3% as compared to 3-mth ended 20/5/2014. This was brought on by higher financing receivables which rose by 21.61% (despite no growth in financing volume at RM844 mil cf. RM843 mil previously) and higher Other Op. Incomes which rose from RM13.7 million to RM23.8 million (due to increase in bad debts recovered, commission from sale of insurance products and AEON Big loyalty programme processing fee). These had more than offset the increase in non-performing loans (with NPL ratio increased from 2.18% to 2.74%); increase in total operating expenses ( the ratio of  total operating expenses against revenue rose from 54.6% to 61.2% due to higher  allowance for impairment losses on financing receivables); and higher average funding cost (though no number was given).


Table: Aeoncr's last 8 quarterly results

From the diagram below, we can see that profits are slowing with profit margin reducing and growth of both top-line & bottom-line tapering off. 


Chart 1: Aeoncr's last 32 quarterly results

Valuation

AEONCR (closed at RM14.24 yesterday) is now trading at a PE of 10.2 times (based on last 4 quarters' EPS of 140 sen). At this PER, AEONCR is deemed reasonably valued.

Technical Outlook

AEONCR is in a consolidating mode after a sharp rally from RM4.00 in 2011 to nearly RM19.00 in 2013. Its immedaite support is at RM13.00 while the immediate resistance is at RM14.00.


Chart 2: Aeoncr's monthly chart as at Jun 25, 2015 (Source: ShareInvestor.com)

Conclusion

Based on good satisfactory financial performance and fair valuation, AEONCR is still a good long-term investment.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, AEONCR.

Wednesday, June 24, 2015

Ulicorp: A silent performer!

Almost a year ago, I posted on the breakout of a Cup-with-handle formation for Ulicorp (here). I was expecting the stock to charge up to RM1.40 & possibly RM1.70.

After that posting, I forgot about the stock until one of my clients told me about it. Looking at the chart, I think the stock has run its course (using the retracement distance and the advance made). In term of valuation, Ulicorp- closed at RM3.84 - is now trading at a PER of 22 times (based on FY2014 EPS of 17.58 sen). Its PB ratio is 2.4 times (based on NTA od RM1.59 as at 31/3/2015). Finally, its DY at 1% is nothing to shout about.

If you were lucky enough to get into this stock, this is a good time to harvest your investment.


Chart: Ulicorp's monthly chart as at June 24, 2015 (Source: ShareInvestor.com)

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, ULICorp.

Paramon: New All-time High

Paramon has been in the news lately. In early June, Malaysian Insider featured a short article on the company where it expects to "achieve its RM600 million property sales target within the next three years, capitalising on existing projects and RM2 billion worth of bids". The latter "includes a bid under the Employees Provident Fund's Kwasa Damansara project in Sungai Buloh, Selangor". For more, go here.
 
This was follow-up by a report from RHB entitled "On the Path of Value Discovery". The full report is available in klse13investor (here).  RHB valued Paramon at RM2.40 based on 40% discount to property RNAV and a 20% holding company discount.

Chartwise, we can see that Paramon has recently surpassed its all-time high of RM1.95 recorded in June 2011. Today it has surpassed the psychological RM2.00 mark. The current rally is the third time that this stock has surpassed its overhead resistance (posed by a slanting line connecting recent highs). In previous instances, the stock surged upward by 50-120%. If the current breakout can enjoy an upward surge of 50%, the share price may move to RM2.55.

 
Chart: Paramon's monthy chart as at Jun 24, 2015_4.00pm (Source: ShareInvestor)

 Financial performance has been satisfactory albeit flattish. 


 Diagram: Paramon's last 10 quarterly P&L & CF (Source: ShareInvestor)

Based on bullish technical breakout, Paramon could be a good stock for trading BUY.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Paramon. 


MUH: Upside Breakout

MUH broke above its downtrend line, RR at RM1.35 this morning. This bullish breakout could be the start of the next upleg for the stock.


Chart: MUH's daily chart as at Jun 24, 2015_11.00am (Source: ShareInvestor)
 
MUH is a building material supplier that's involved in the manufacturing of fire resistance bricks, hollow blocks, paving blocks & box culverts (here). Its sudden increase in revenue & profits is due to its property development subsidiary, TF Land Sdn Bhd (here). Because of the property development division, MUH's EPS soared to 41 sen for FY2014. For 1Q2015, its EPS was 8.2 sen or annualized EPS of 32.8 sen for FY2015. At RM1.44 (as at 4.00pm), MUH is trading at a PER of 4.4 times.


Diagram: MUH's last 10 quarterly P&L & CF (Source: ShareInvestor)

Based on attractive valuation & bullish technical outlook, MUH could be a trading BUY.
 
Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, MUH.

VS: Earnings remained strong

Result Update

For QE30/4/2015, VS's net profit increased by 45% q-o-q but rose 595% y-o-y to RM26.5 million while revenue dropped 10% q-o-q or rose 12% y-o-y to RM420 million. VS's PBT rose q-o-q mainly  due to better sales mix contributed by the Malaysia operations as compared to the preceding quarter. 


Table 2: VS's last 8 quarterly results


Chart 1: VS's last 41 quarterly results

Valuation

VS (closed at RM4.49 yesterday) is trading at a trailing PE of 7.5 times (based on last 4 quarters' EPS of 60 sen). Based on the low PE, VS is deemed attractively valued.

Technical Outlook

VS is trading at its all-time high. The share price and indicators appear to be topping out- reflecting investors' cautious stand on this stock. They may be wondering: Is this stock at peak earning? If so, we must be cautious in the event of earning reversal.


Chart 3: VS's monthly chart as at Jun 23, 2015 (Source: ShareInvestor.com)

Conclusion

Based on satisfactory financial performance and attractive valuation, VS is a good stock for long-term investment. However, I would advise caution not to buy excessively as the stock could be at peak earning.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, VS.

Prlexus: Approaching its all-time high

Results Update

For QE30/4/2015, Prlexus's net profit dropped 70% q-o-q by 6% y-o-y to RM2.1 million while revenue was mixed- dropped 20% q-o-q but rose 25% y-o-y to RM67 million. Revenue dropped q-o-q due to lower revenue from the apparel division and advertising division of RM16.4 million and RM 865,000 respectively during the quarter. Profit dropped q-o-q as a result of lower revenue.

  
Table 1: Prlexus's last 8 quarterly results


Chart 1: Prlexus's last 27 quarterly results

Valuation

Prlexus (closed at RM2.16 yesterday) is now trading at a PE of 11 times (based on last 4 quarters' EPS of 20 sen). At this PER, Prlexus is deemed fully valued.

Technical Outlook

Prlexus is in a long-term uptrend. Its immediate resistance is its all-time high at RM2.30 while its good support level is at the 10-month SMA line at RM1.60.


Chart 2: Prlexus's monthly chart as at Jun 23, 2015 (Source: ShareInvestor)

Conclusion

Based on weaker financial performance and full valuation, it may be time to take profit on Prlexus.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Prlexus.

Magni: Earnings stablilized


Results Update

For QE30/4/2015, Magni's net profit dropped 5% q-o-q but rose 95% y-o-y to RM16.5 million while revenue dropped 12% q-o-q but rose 9% y-o-y to RM177 million. Revenue increased q-o-q due to higher sale orders received from garment and packaging businesses by 29.0% and 1.1% respectively. PBT for the current quarter increased q-o-q mainly due to higher revenue and other operating income.


Table: Magni's last 8 quarterly results


Chart 1: Magni's last 25 quarterly results

Valuation

Magni (trading at RM3.60 yesterday) has a trailing PE of 7.5 times (based on last 4 quarters' EPS of 48 sen). At this PER, Magni's valuation is still undemanding. It may command a PE of 9-10 times.

Technical Outlook

Magni is in a gradual uptrend line. Its immediate support is at the horizontal support of RM3.10- coinciding with the 10-Month SMA line.


Chart 2: Magni's weekly chart as at Jun 23, 2015 (Source: ShareInvestor.com)

Conclusion

Despite the satisfactory financial performance & attractive valuation, Magni is still a good stock for long-term investment.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Magni.

Tuesday, June 23, 2015

Parkson: A long & winding road

Result Update

For QE31/3/2015, Parkson's net profit dropped by 97% q-o-q or 95% y-o-y to RM3 million while revenue inched higher by 7% q-o-q or 9% y-o-y to RM1.05 billion. Revenue & operating profit increased q-o-q due to CNY & higher consumer spending ahead of the implementation of GST in Malaysia. PBT dropped due to one-off provision for arbitral award in respect of disputes arising from the Beijing Metro City Shopping Plaza's tenancy agreement (mentioned in an earlier post).


Table 1: Parkson's last 8 quarterly results


Chart 1: Parkson's last 33 quarterly results 

Valuation

Parkson (closed at RM1.67 as at 10.00am) is now trading at a PER of 11 times (based on last 4 quarters' EPS of 15 sen). If the exceptional gain from the sale of the disposal of KL Festival City Mall amounting to RM109 million and the impairment loss on goodwill amounting to RM44 million booked into the accounts in QE31/12/2014, Parkson's last 4 quarters' EPS would be lower to 10 sen. This would translate to a PER of 17 ti mes. At this PER, Parkson is deemed fully valued.

Technical Outlook

Parkson has broken below the gradual uptrend line, SS at RM2.00. The "saucer bottom" line, AB should provide some support to the stock at RM1.50-1.60. On extreme weakness, overshooting is possible as seen in 2003.


Chart 2: Parkson's weekly chart as at Jun 22, 2015  (Source: ShareInvestor.com)

Conclusion

Despite poorer financial performance, full valuation & bearish technical outlook, Parkson is worth tracking as the share price has dropped substantially. The contrarian investors may consider this stock for long-term investment at the present price while those who bought earlier, should hold onto their investment.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Parkson.