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Tuesday, January 27, 2015

Market Outlook at at January 27, 2015

Due to 2 holidays- the FT Day replacement & Thaipusam - next week will be a shortened week for Bursa Malaysia. As a result, we are seeing some house-keeping activities in the market, which normally tend to be negative. However, with ECB announcement of QE of Euro 1.1 Trillion (or Euro 60 billion a month) and crude oil prices stabilizing, I believe the market may more reasons to be slightly upbeat than downbeat.

 
Diagram: Malaysian Public Holidays for Jan-Jun 2015

Chartwise, FBMKLCI & FBMEMAS performed as expected. Both reacted very positively to the breakout above the neckline of the inverted Head-and-Shoulders formation. The rally failed to break above the intermediate downtrend line for both indices. It is important that the pullback does not violate the recently surpassed neckline (at A-B or 1775 for FBMKLCI or at A1-B1 or 12150 for FBMEMAS).


Chart: FBMKLCI & FBMEMAS's daily chart as at Jan 26, 2015 (Source: ShareInvestor.com)

I believe that the market recovery is still intact provided the necklines (as mentioned above) are not violated. On the other hand, if FBMKLCI and FBMEMAS can surpass the intermediate downtrend line at 1810 & 12450, respectively, the market could continue its prior uptrend.

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 FBMKLCI.

Nestle: It's a Swiss Thing!

Last week, Nestle broke above its strong horizontal resistance at ~RM70. The breakout is not accompanied by increased volume. If it can recruit enough buying support, it may continue to rise. The potential target is RM80.00.

Based on technical consideration, Nestle can be a good medium-term investment.


Chart: Nestle's monthly chart as at Jan 26, 2015 (Source: ShareInvestor.com)

We can say a lot about this well-managed company but we cannot say that it is a cheap stock. Its PER is at 30x while its PB ratio is 23x. For a "hugely expensive" stock, it has a decent DY of 3.3%. In fact, that and its strong management have always been its strong selling selling points. Let's see how far these strengths will carry the stock. Good luck!


Table: Nestle's key Statistics (Powered by 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,Nestle.

IHH & KPJ: A Tale of 2 Stocks

Two days ago, IHH broke above its September 2014 high of RM5.10-5.12. It rose to an intra-day high of RM5.34 yesterday before it closed at RM5.26. On the other hand, another healthcare group, KPJ has yet to recover above its September 2014 high of RM4.00. It closed at RM3.87 yesterday.

If we look at the charts for both stocks, we can see that IHH has been on a steady uptrend since 2013 while KPJ's uptrend was broken in July 2013. The divergence in the price movement began in July 2014 when KPJ peaked at RM4.90 while IHH continued to rise to a high of RM4.40 before correction set in. After a 10-month sideways movement, IHH broke above its September 2013 high in June 2014 and rose to a high of RM5.12 in September 2014. Meanwhile KPJ also had a breakout in June 2014 - a breakout of an intermediate downtrend that started in July 2013 - at RM3.30. The recovery did not go very far as the share price failed to break above the strong horizontal resistance at RM4.00. KPJ corrected and broke below its intermediate uptrend line that started in April 2014.


Chart 1: IHH & KPJ's weekly chart as at Jan 26, 2015 (Source: ShareInvestor.com)

Why is IHH outperforming KPJ? You can make a case for IHH's earning benefiting from the strengthening of foreign currencies vis-a-vis the MYR but does it justify the costly PER of 58x vs. KPJ's 31x or PB ratio of 6.6x vs. KPJ's 4.6x. Its minuscule DY of 0.004% is certainly no comparison to a more respective DY of 1.5% reported by KPJ.

To be fair, IHH has its strong points. Its net profit margin is higher at 9.3% vs. KPJ's 4.4%. Its financial position is healthier with GR at 0.25x vs. KPJ's 0.94x & CR at 1.85x vs. KPJ's 0.87x.

However, KPJ's management is working with lower capital and for this, they managed to squeezed out a decent return compared to IHH. KPJ's ROE beat IHH's handily at 9.4% vs. 3.5%.What about ROA? Even here, KPJ did better - 3.7% vs. IHH's 2.3%.



Table: IHH & KPJ's financial ratios compared (Powered by ShareInvestors.com)

There is no denying that IHH has a sexier story. It grew by leap & bound- both organically or via M&A while KPJ grew mainly organically. For recent P&L & CF comparison, see the 2 diagrams below.

If you are a trader, IHH is a good trading BUY with its breakout above its recent high. If IHH can repeat the last 2 big moves (of RM0.85 each), the current breakout could send this stock to RM6.00. On the other hand, if you are value investor and a patient sort of guy, you may bet on KPJ doing some catching up. And, IF (a big if) KPJ can break above the RM4.00, it too can be a trading BUY.


Diagram 1: IHH & KPJ's 10-quarter P&L compared (Powered by ShareInvestors.com)


Diagram 2: IHH & KPJ's 10-quarter CF compared (Powered by ShareInvestors.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, IHH & KPJ.

Friday, January 23, 2015

MPI: Bottom-line rose further

Result Update

For QE31/12/2014, MPI's net profit jumped 21% q-o-q or 198% y-o-y to RM24 million. PBT increased q-o-q due to higher revenue from the smartphone sector, strengthening of USD via-a-vis the MYR and lower material costs. Revenue increased from RM327.7 million to RM338.3 million while revenue mix shifted from USA & Europe (by 1% & 2% respectively) to Asia (which rose by 3%).


Table: MPI's last 8 quarterly results


Chart 1: MPI's last 32 quarterly results

Valuation

MPI (closed at RM5.50 yesterday) is now trading at a trailing PER of 17 times (based on last 4 quarters' EPS of 33 sen). The high multiple is supported by strong growth of 64% last 4 quarters (a result of the low base). If earning were to grow at a moderate rate this year (say at 15-20%), then the PER multiple of 17% is reasonable, though promising limited upside.

Technical Outlook

From Chart 2, we can see that MPI has been in an intermediate downtrend since August last year. In early January this year, MPI broke above the downtrend at RM4.80. It is now pressing against the horizontal line at RM5.50.


Chart 3: MPI's weekly chart as at Jan 22, 2015 (Source: ShareInvestor.com)

From Chart 3, we can see that MPI has broken above the long-term downtrend line at RM4.50 in May last year. Recently, this long-term downtrend line provided support to the share price- from where the stock rebounded back to the current level.


Chart 3: MPI's monthly chart as at Jan 22, 2015 (Source: ShareInvestor.com)

Conclusion

Based on the good financial performance, reasonable valuation and mildly positive technical outlook, MPI is a good stock for medium-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, MPI.

Tenaga: Bottom-line continued to rise

Results Update

For QE31/11/2014, Tenaga's revenue decreased by RM440.3 million or 3.9% q-o-q as a direct result of a lower demand growth recorded in the current quarter of 2.3% in the Peninsula and 0.7% in Sabah. Meanwhile net profit increased q-o-q to RM2,351.9 million as compared to RM1,355.9 million recorded in the preceding quarter mainly due to a lower operating cost in the current quarter. The lower operating cost was mainly due to the lower fuel cost.


Table 1: Tenaga's last 8 quarterly results


Chart 1: Tenaga's last 28 quarterly results

Valuation

Tenaga (closed at RM14.52 yesterday) is now trading at a trailing PER of 11.6 times (based on last 4 quarters' EPS of 125.6 sen). At this PER multiple, Tenaga is deemed fairly attractive.

Technical Outlook

From daily Chart 2, we can see that Tenaga broke above its recent high of RM14.60 (recorded in November 2014). However, the breakout did not sustain. This may lead to a short period of correction ahead. In the event of short-term weakness, the stock can expect support from the "uptrend line" at RM13.80 (plus the psychological RM14.00 mark).


Chart 3: Tenaga's daily chart as at Jan 22, 2015 (Source: ShareInvestor.com)

From the monthly Chart 3, we can see that Tenaga has surpassed the upper line of the expanding triagle at RM12.00 in late 2013. As such, Tenaga can expect string support at the surpassed RM12.00 in the event of weakness or correction.


Chart 4: Tenaga's monthly chart as at Jan 22, 2015 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance, attractive valuation & positive technical outlook (albeit possible short-term weakness), Tenaga remains 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, Tenaga.

Thursday, January 22, 2015

CIMB: A banking stock worth considering

CIMB dropped back substantially in the past 4 months, following the announcement of the merger with RHBCap & MBSB. The termination of the proposed merger was well greeted by the market and CIMB rebounded to an intra-day high of RM6.05 on Jan 14. Since then, the stock has eased off a bit. Is it time to consider buying CIMB?

From the monthly Chart 1, we can see that CIMB had in fact dropped to its long-term uptrend line that stretches back to 2001. The support for this long-term uptrend line is RM5.00-5.20.


Chart 1: Guoco's monthly chart as at Jan 22, 2015_4.00pm (Source: ShareInvestor.com)

From the daily Chart 2 below, we can see that the share price has pulled back to the horizontal line at RM5.60. If this line failed, the share price could find support at the next horizontal line at RM5.30.


Chart 2: Guoco's daily chart as at Jan 22, 2015_4.00pm (Source: ShareInvestor.com)

I believe that CIMB is a good stock for long-term investment at the current price. You may consider nibbling some at the present price of RM5.64-5.65.

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,CIMB.

CPO: Just broke its medium-term uptrend line

CPO broke its medium-term uptrend line, SS at RM2370 as well as the horizontal line at RM2300. Its next support will be at the horizontal line at RM2200. Beyond that, it may find strong support at the horizontal line at RM2100.

We will see whether the extremely bearish scenario as highlighted in my last post (here) would pan out. For the sake of our economy, let's hope not.


Chart: CPO's weekly chart as at Jan 21, 2015 (Source: iFS. marketcenter.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, CPO or plantation stocks.

Wednesday, January 21, 2015

Market Outlook as at January 21, 2015

On October 21, I had posited that FBMKLCI had broken its uptrend line. With that, the market would turn bearish until the index has climbed back above the uptrend line. Since then, the market has been declining until the middle of December.

From the monthly Chart 1 below, we can see clearly that the long-term uptrend line- which stretches back to late 2008 - was violated in late October.


Chart 1: FBMKLCI's monthly chart as at Jan 21, 2015 (Source: ShareInvestor.com)

If we look at the weekly Chart 2, we can see that FBMKLCI peaked in June-July last year. A Head-and-Shoulder formation can be clearly drawn. In December, FBMKLCI broke the neckline of the Head-and-Shoulder formation at 1780. 


Chart 2: FBMKLCI's weekly chart as at Jan 21, 2015 (Source: ShareInvestor.com)

The presence of the Head-and-Shoulder reversal plus the breakdown of the long-term uptrend line are the reasons why I am very cautious & negative about this market. 

Interestingly, the medium-term downtrend that dates back to late November last year has formed an inverted Head-and-Shoulder formation (see daily Chart 3). If FBMKLCI can break about the neckline of that inverted head-and-Shoulder formation at 1775, the medium-term downtrend would reverse and the index could charge up to the intermediate downtrend line (that stretches back to September last year). If the index can also break above the intermediate downtrend line at 1810, we may see the continuation of the prior long-term uptrend!


Chart 3: FBMKLCI's daily chart as at Jan 21, 2015 (Source: ShareInvestor.com)

In fact, if you look at the FBMEMAS, you would see a similar inverted head-and-Shoulder formation at the end of the medium-term downtrend. Today, FBMEMAS broke above the neckline of that inverted Head-and-Shoulder formation at 12200. This means that FBMEMAS could soon test its intermediate downtrend line at 12350.


Chart 4: FBMEMAS's daily chart as at Jan 21, 2015 (Source: ShareInvestor.com)

Based on the above, we may see a rally over the next 1-2 week, which some would call the lunar new year rally. If you are nimble enough, you can try your luck and make a small new ANGPOW for the new year. However, you are advised to exercise careful discretion in all your trading as the markets everywhere are extremely volatile.

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 FBMKLCI.

Guoco: Testing its downtrend line

Guoco is now testing its downtrend line at RM1.34-1.36. This coincides with the horizontal line at about RM1.36. If Guoco can charge thru this price, it could signal the start of price recovery.

Based on technical consideration, Guoco could be good a trading BUY if & after it has surpassed the RM1.36 mark.


Chart: Guoco's daily chart as at Jan 20, 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, Guoco

Tuesday, January 20, 2015

Maybulk: Testing its downtrend line

Maybulk is now testing its downtrend line at RM1.33. This coincides with the horizontal line at about RM1.30. An upside breakout above RM1.33 could signal the start of price recovery for Maybulk.

Based on technical consideration, Maybulk could be good a trading BUY if & after it has surpassed the RM1.33 mark.


Chart: Maybulk's daily chart as at Jan 20, 2015_10.30am (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, Maybulk

MPHBCAP: Broke above its downtrend line

MPHBCAP broke above its downtrend line at RM2.12 yesterday. As at 11.55am, MPHBCAP is down slightly- struggling to hold onto the breakout level. If it can stay above RM2.12, MOHBCAP's breakout is valid and it could lead to either a sideway movement or the start of a gradual price recovery. Either way, the stock could be a good buy for medium-term investment at this juncture.


Chart: MPHBCAP's daily chart as at Jan 20, 2015_11.55am (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, MPHBCAP.

Monday, January 19, 2015

Crude Oil, CRB & Gold: Some thoughts


In 2007-2008, crude oil prices went into a parabolic rise. This was followed by a parabolic plunge or fall in 2008-2009. See Chart 1 below.


Chart 1: WTIC's weekly chart from 2007-2011 (Source: gicharts.blogspot.com)

Since July 2014, we have been witnessing a parabolic plunge in crude oil prices. The price fall became steeper as the time passed. As noted previously, I believe that the bottom could be at about USD50, with possible intra-day lows of RM40 (due to overshooting). I have highlighted that the technical indicators are supportive of a bottom at these prices. If this scenario pans out, we might see a more than decent rebound in the price of crude oil.


Chart 2: WTIC's daily & weekly chart as at Jan 16, 2015 (Source: Stockcharts.com)

The drop in the prices of crude oil coincides with the drop in CRB index, which is the commodity future price index which consists of 28 commodities. The CRB broke its "pennant" formation at 275 in October last year. A 1-to-1 projection would place the target for CRB at 225. See Chart 3 below.


Chart 3: CRB's weekly chart as at Jan 16, 2015 (Source: Stockcharts.com)

Interestingly, Barry Ritholz of the Big Picture had posted a long-term chart for CRB, which was prepared by Bianco Research L.L.C. For more, go here. Using that chart, we can see that CRB broke above its strong horizontal resistance at 135 in 1970. In fact, CRB is in an uptrend line which stretches back to 1933. That uptrend line, SS should provide support to the index in the current drop at ~220.


Chart 4: CRB's monthly chart from 1749-2012 (Source: Bianco Research L.L.C.)

Finally, let's look at gold. That barbaric relic has been dropping for the past 3 years, from a high of just above USD1800 in late 2011 to a recent low of just under USD1200 (in October-November 2014). Due to recent currency turmoil and heightened economic risks in some oil-exporting countries, gold prices have enjoy a rebound. It may have just broken above its intermediate downtrend line. Its strong resistance is at USD1380-1400.


Chart 5: Gold's monthly chart as at Jan 16, 2015 (Source: Bullionvault)


Chart 6: Gold's weekly chart as at Jan 16, 2015 (Source: Stockcharts.com)

Based on the above, I believe gold could be a good buy. It is still to early to make a buy call on crude oil. My earlier call on O&G stocks has panned out quite well. Good luck

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, gold, crude oil or O&G stocks.

Wednesday, January 14, 2015

CPO: Calm Before the Storm?

Many investors are aware of the sharp fall in the price of crude oil. How many of them are aware of the drop in other commodities prices? One of the developing stories that is getting a lot of attention now is the drop in the price of copper. The price of copper broke the strong support of USD2.70 a pound. It was quickly followed by a breakdown of the psychological USD2.50 mark. The next strong support could be the psychological USD2.00 mark & beyond that, USD1.50! See updated Chart 1 & Chart 2 (updated to Jan 12 only).


Chart 1: Copper's monthly chart as at Jan 13, 2015


Chart 2: Copper's long-term monthly chart as at Jan 12, 2015

The drop in the price of copper is stunning. It may reflect a world where supply of many commodities exceeds their demand. It could be a reflection of the slowdown in global economy or simply malinvestment due to excessive money supply everywhere.

Closer to home, we need to ask whether CPO supply has also exceeded demand. After all, we read every now and then reports that the government is extending export duty exemption for CPO in order to bring down CPO stockpiles.

CPO prices have risen by 20% in the past 5 months from RM2000 to RM2400 today. This may imply that the demand for CPO is still good. However, the increase in CPO prices may be due to the 15%-drop in our MYR vis-a-vis USD.


Chart 3: CPO's weekly chart as at Jan 13, 2015


Chart 4: USD-MYR's daily chart as at Jan 13, 2015

CPO is a global commodity. A good study of the trend of CPO prices is to look at the price chart plotted in USD. See the chart below.


Chart 5: CPO's long-term monthly chart as at Jan 13, 2015

We can see that CPO may have broken below its long-term uptrend line, S1-S1 a few months ago. This breakdown is as significant as the breakdown in the long-term uptrend, SS in 1998 when CPO prices dropped to USD200 a tonne. The 1998 price decline for CPO led to a sharp drop in the Plantation index. We may not have felt it then because all the stocks on the exchange dropped that year due to the Asian Financial Crisis. However, if the CPO prices were to trend lower drastically, plantation companies' earning will take a hit and their share prices would certain take a beating. Our Plantation index may have already broken its uptrend line, S1-S1.


Chart 6: Plantation's monthly charts as at Jan 13, 2015 (Powered by ShareInvestor.com)

If CPO prices were to drop drastically, the psychological impact would be very severe as the Malaysian economy, which is negatively impacted by crude oil price decline, would take another knock from lower export receipt. It could lead to further weakness for our currency and our stock market.

Let's hope that CPO prices & export would continue to hold up despite the technical breakdown.

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, CPO or plantation stocks.