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Friday, May 22, 2015

Airasia: A strong support broken

Airasia broke the horizontal support at RM2.20 yesterday and closed at RM2.16 (see Chart 1). Instead of recovering, it went down further to RM2.04 as at 4:00pm today. The stock is likely to test RM2.00 next week. I will be very surprise if the RM2.00 psychological mark were to fail if a decent fight. Having said that, I believe the strong support will surface when the stock reach the RM1.80 mark. This is the confluence of the horizontal support and the lower line of the downward channel that dates back to 2011.


Chart 1: Airasia's weekly chart as at May 22, 2015_3.55pm (Source: ShareInvestor)


Chart 2: Airasia's monthly chart as at May 22, 2015_3.55pm (Source: ShareInvestor)

I expect more weakness or downside for Airasia for near term. Good entry will be at RM1.80. For the braveheart, you can try a bit at RM2.00.


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, Airasia.

Market Outlook as at May 22, 2015

FBMKLCI & FBMEMAS are again back to the low recorded two weeks ago (point 'A'). If they go below this level, then a medium-term downtrend could begin. This would be the end of the 5-month rally that dated back to December last year. Even the support at 1770-1780 for FBMKLCI or 12100-12300 for FBMEMAS would be a poor consolation if the downtrend starts. 


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


Chart 2: FBMEMAS's daily chart as at May 21, 2015 (Source: ShareInvestor.com)

The sharp drop in the market today seems to coincide with the news reports that Deputy Prime Minister ('DPM') has called for the sacking of the Board of Directors of 1MDB. Is this the breaking of rank between our DPM & the PM on the issue of 1MDB? Would this lead to a bigger riff and a challenge for the Presidency in UMNO?

Stock markets abhor uncertainty, especially political uncertainty. This will add to the growing list of concerns, which includes poor consumer sentiment, uncertainty in the Euro-zone, heightened geopolitical risk in the Middle East and weak global economy. Despite all these, the stock market is in its 7th year high- thanks to the unconventional monetary policies from US Federal Reserve, ECB, Japanese central bank and a host of other central banks. Where will we be without easy money?!

Kossan: Earnings continued to rise

Result Update

For QE31/3/2014, Kossan's net profit increased 20% q-o-q or 23% y-o-y to RM45 million while revenue increased 2% q-o-q or 21% y-o-y to RM369 million. Bottom-line increased due to higher pre-tax profit contribution from the Gloves division, which had more than offset the decline in pre-tax profit contribution from the Technical Rubber division.

The Gloves division saw higher revenue due to higher volume sold (increase of 4.5%) & higher selling prices (increase of 2.5%). Higher  sales,  better product mix and improved production efficiency led to a  28.1%-increase in profit before taxation.

The Technical Rubber Products division saw lower Revenue and PBT due to softer demand as a result of weak world economy & local market uncertainty (caused by GST implementation) plus completion of projects to supply infrastructure projects.

Finally, Kossan's Clean-room division managed to record improved pre-tax profits of 24.8% (to RM0.88 million) despite a marginal 7.2%-decline  in  revenue.


Table: Kossan's last 8 quarterly results

Kossan's top-line & bottom-line continued their steady growth. Due to its efficient production process, the profit margin is also on the upward trend.


Chart 1: Kossan's last 35 quarterly results

Valuation

Kossan (closed at RM6.20 yesterday) is now trading at a PE of 26 times (based on last 4 quarters' EPS of 23.8 sen). At this PE multiple, Kossan is deemed fully valued.

Technical Outlook

Kossan is in a long-term uptrend, with share prices moving higher within a channel. The strong momentum could send the share prices to test the upper line.


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

Conclusion

Based on improved financial performance & positive technical outlook, Kossan is a good stock for long-term investment. However, its demanding valuation could cap its upside potential.

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, Kossan.

Tuesday, May 19, 2015

Shell: Green Shots of Recovery?

Background

Shell Refining Co. (F.O.M.) Berhad (“Shell”) is involved in the refining and manufacturing of petroleum products in Malaysia. Its 125,000 barrels/day refinery is located in Port Dickson. Due to low margin, the company is examining long-term options, which may include the potential sale of the refinery or its conversion to a storage terminal. For more, go here.

Latest Quarterly Results

For QE31/3/2015, Shel reported a net profit of RM84 million on a revenue of RM2.48 billion. Bottom-line recovered from a net loss of RM916 million recorded in the immediate preceding quarter, QE31/12/2014 or a net loss of RM44 million recorded in the same quarter last year, QE31/3/2014. Improved bottom-line is contributed by improved refining margins and losses in Q4 2014 due to stockholding losses of RM445.8 million and impairment losses of RM 461 million. Revenue dropped q-o-q by 15% to RM2.5 billion due to decreasing product prices.


Table: Shell's last 8 quarterly results


Chart 1: Shell's last 35 quarterly result

Financial Position

As at 31/3/2015, Shell's financial position is deemed challenging, with current ratio at 1.03 times & gearing ratio at 6.31 times. If not for the confidence in its major shareholder, Shell Overseas Holdings Ltd (a part of the Royal Dutch Shell plc, ahich is in turn one of the six Oil & Gas supermajors as well as the 4th largest company in the world in 2014 in term of revenue).

Valuation

Shell (closed at RM4.90 yesterday) is now trading at 3.6 times its book value (based on NTA of RM1.36 as at 31/3/2015). We can't compute its PE multiple as the company made a loss of RM3.53 per share in the last quarters. In addition, Shell has ceased paying dividend since FY2013. Thus, Shell's valuation is deemed demanding based on these models (PBR, PER & DY). The only justification to get into this stock is that its earning could be reaching its trough. As the saying goes, what goes up must coming down. Conversely, what goes down must come up.

Technical Outlook

Shell has been in a steady & sharp decline for the past 4 years.

 
Chart 2: Shell's monthly chart as at May 18, 2015 (Source: ShareInvestor,com)

If we put Shell's monthly chart next to its earning chart for the past 10 years, we can see that the price  movement tracks the earning trend fairly well. To gauge when to buy, we need to know when the earning has bottomed. The over-sized loss in QE31/12/2014 & the small profit in QE31/3/2015 could mark the bottom & recovery in the earning.


Chart 3: Shell's monthly price chart & earning chart from FY2005 until today  

Conclusion

Based on improved financial performance, Shell could be a good stock for long-term investment. However, any entry should be carried out very slowly as the earning recovery is still very tentative.

 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, Shell.

Monday, May 18, 2015

GLBhd: Upside Breakout

Golden Land Bhe ("GLBhd", formerly Tanah Emas Corporation Bhd) has broken above the line connecting its recent peaks, RR at RM1.35 last Friday. With this bullish breakout, the stock may rise to its potential target price of RM1.75.

Based on technical breakout, GLBhd could be a trading BUY.


Chart: GLBhd's monthly chart as at May 15, 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, GLBhd.

Friday, May 15, 2015

YSPSAH: Bottom-line soared

Background

Y.S.P.Southeast Asia Holding Berhad (“YSPSAH”) is involved in the importation, export, and tradeing of various kinds of pharmaceutical products as well as the manufacturing of pharmaceutical products.

Latest Quarterly Results

For QE31/3/2015, YSPSAH's net profit rose 33% q-o-q or 71% y-o-y to RM9.3 million while revenue rose 8% q-o-q or 15% y-o-y to RM59.3 million. revenue rose q-o-q due to higher demand of the Group's products especially from export segment. Bottom-line improved due to higher revenue, more efficient operations and lower cost margin for product mix during the quarter under review.

 
Table: YSPSAH's last 8 quarterly results

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Chart 1: YSPSAHs last 11 quarterly result


Chart 2: YSPSAH's last 11 yearly result

Financial Position

As at 31/3/2015, YSPSAH's financial position is deemed satisfactory, with current ratio at 4.4 times & gearing ratio at 0.3 times. Cash balances stood at RM56 million before deducting loan & borrowings totaling RM17 million & finance leases totaling RM7 million. After netting off, the net cash balances stood at RM32 million (or, 24 sen p.s.).

Valuation

YSPSAH is rallying in early morning trades now. As at 9.30am, it trading at RM1.80 or at a PE of 9 times (based on last 4 quarters' EPS of 20.4 sen). At this PE, YSPSAH is deemed undervalued. It could command a PE multiple of 10-12 times for a smallcap pharmaceutical stock in the current environment.

Technical Outlook

YSPSAH broke above its horizontal line at RM1.25 in June 2013 & rallied to a high of RM1.85 in May 2014. Further upside would only come if YSPSAH can break above the RM1.85 mark.


Chart 3: YSPSAH's monthly chart as at May 14, 2015 (Source: ShareInvestor,com)

Conclusion

Based on improved financial performance, healthy financial position & attractive valuation, YSPSAH could be 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, YSPSAH.

Thursday, May 14, 2015

Tienwah: Bottom-line worsened

Result Update

For QE31/3/2015, Tienwah's net profit rose 167% q-o-q to RM2.1 million while revenue was only marginally higher at RM87.5 million. Compared to the same quarter last year, net profit was 52% lower while revenue was 5% higher.

Tienwah's PBT dropped q-o-q from RM1.5 million to RM1.2 million. While the drop is small, it must be noted that PBT for QE31/12/2014 was significantly impacted by a series of one-off  items, such as sales  rebate  of RM3.9  million, redundancy  expenses  of  RM2.0 million  and  write -down  of inventories to net realizable value of RM2.2 million. If these exceptional items were excluded, PBT for QE31/12/2014 would have been much higher at RM9.5 million. And, the q-o-q drop in PBT would have been RM8.5 million (instead of only RM0.3 million). Thus, Tienwah's financial performance has worsened contrary to my earlier expectation.


Table: Tienwah's last 8 quarterly results


Chart 1: Tienwah's last 32 quarterly results

Valuation

Tienwah (closed at RM1.86 yesterday) is trading at a PE of 16 times (based on my projected EPS 11.7 sen). If the one-off items booked in QE31/12/2014 were excluded, the last 4 quarters' EPS would be higher at 20.0 sen and the PE multiple would be lower at 9.3 times. Since Tienwah's earnings showed no improvement in QE31/3/2015, there is no point in worrying about under-estimating its earnings going forward... for now. At the PE multiple of 16 times, Tienwah is deemed fairly valued.

Technical Outlook

As noted previously, Tienwah has been in a gradual downtrend since the beginning of 2014. It seems to have found its support at RM1.85-1.87.


Chart 2: Tienwah's weekly chart as at May 14, 2015_10.30am (Source: Share Investors)

From the monthly chart, we can see that the stock is however in a long-term uptrend with support at RM1.70.

 
Chart 3: Tienwah's monthly chart as at May 14, 2015_10.30am (Source: Share Investors) 

Conclusion

Despite the poor financial performance, Tienwah could be a good stock for long-term investment based on its mildly positive technical outlook.

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, Tienwah.

SEG: Earnings improved

Result Update

For QE31/3/2015, SEG's net profit rose 131% q-o-q or 50% y-o-y to RM10.8 million while revenue increased by 14% q-o-q or 10% y-o-y to RM67 million. The improvement is due to seasonally factor.


Table: SEG's last 8 quarterly results


Chart 1: SEG's last 28 quarterly results

Valuation

SEG (closed at RM1.46 yesterday) is now trading at a PE of 36 times (based on last 4 quarters' EPS of 4.11 sen). At this PE multiple, SEG is deemed over valued.

SEG paid out dividend totaling 11 sen for FY2014. For FY2015, the interim dividend of 7 sen is higher than FY2014 interim of 5 sen. Assuming the final dividend is similar to the interim dividend, FY2015 dividend will amount to 14 sen. Thus, SEG's DY is very attractive at 10%.

Technical Outlook

SEG broke above its intermediate downtrend line, RR at RM1.45-1.46 in April. The upside is capped by the horizontal line at RM1.48. See Chart 2.


Chart 2: SEG's weekly chart as at May 14, 2015_10.30am (Source: ShareInvestor.com)

If SEG can surpass the resistance at RM1.48 (preferably, the psychological RM1.50 too), the stock may revisit its high at RM2.00.


Chart 3: SEG's monthy chart as at May 14, 2015_10.30am (Source: ShareInvestor.com)

Conclusion

Based the improved financial performance & mildly positive technical outlook, SEG could be a good stock for a trading BUY. Its high DY would certainly make it an income stock.

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, SEG.

TChong: Improved sequential earnings

Result Update

For QE31/3/2015, TChong's net profit soared 204% q-o-q to RM26 million while revenue rose 24% to RM1.569 billion. Compared to the same quarter last year, net profit was down 36% despite a 25%-rise in revenue.

Revenue rose q-o-q due 24.3%- increase in revenue from Vehicle Assembly, Mfg, Distribution & After-Sale Services Division. This was mainly due to higher sales volume arising  from  the  strong sales and marketing efforts. EBITDA rose 97.7% q-o-q due to realignment of sales strategy and promotional campaigns.

The Financial Services division enjoyed a 10.9%-increase in revenue to RM14.4 million while EBITDA rose from RM2.2 million to RM7.1 million. Other Operations division saw its revenue rose from RM3.5 million to RM4.1 million but its EBITDA dropped RM11.8 million to RM5.6 million as the preceding quarter's EBITDA was boosted by an one-off revaluation gain from investment properties.


Table: TChong's last 8 quarterly results


Chart 1: TChong's last 34 quarterly results

Valuation

TChong (closed at RM3.05 yesterday) is now trading at a PE of 22 times (based on last 4 quarters' EPS of 13.9 sen). At this PE multiple, TChong is deemed over valued.

Technical Outlook

TChong is in a long-term upward channel that started in 1999. However, it is trending down over the past 2 years after it tested the upper boundary of that channel. I am doubtful TChong will test the lower boundary at RM1.80-2.00. It has already showed signs of bottoming at around RM3.00. If this fails to hold up the stock, the next support will be the horizontal line at RM2.20.


Chart 2: TChong's weekly chart as at May 14, 2015-9.45am (Source: Tradesignum)

Conclusion

Despite the poor financial performance, demanding valuation & bearish technical outlook, TChong is a good stock for long-term investment. For now, it is worth close monitoring to ascertain whether the RM3.00 support is the base from which the stock would stage its recovery.

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, TChong.

Wednesday, May 13, 2015

SCN: The Authacity of Hope

The unfortunate shareholders of Scan Associates Bhd ("SCN"), who have been suffering in silence for the past few years, were given a further beating when the share price dropped from RM0.13 to RM0.04 in the past few days. That's a long way down from the high of RM2.30 recorded in January 2007.


Chart 1: SCN's monthly chart as at May 12, 2015 (Source: ShareInvestor.com)   


Chart 2: SCN's daily chart as at May 12, 2015 (Source: ShareInvestor.com)   

However, this morning SCN rebounded on news report that the company is suing Bursa Malaysia for exercising its duty to classify the stock as a Guidance Note 3 (GN3) issue based rules 2.1(b) and (c) of GN3. Bursa made that decision by referring to SCN's fourth quarter results for 2014.

SCN's suit is probably based on two grounds. The first ground was that the "company has no means to make such announcement as the company Secretary had resigned on the same day." The announcement in question refers to the announcement that "company had triggered rules 2.1(b) and (c)  of GN 3 based on the company 's Q4 2014 results". The second ground is probably the interpretation of rules 2.1(b) and (c)  of GN 3. The good news for the shareholders of SCN is that their company was granted an ad interim injunction by the high court on May 11 to restrain Bursa Malaysia from implementing the classification of the company". That may explain why the share price is up today.

The first ground for the suit - my Company Secretary has left - should not be allowed to stand and be used as an excuse for all future failure to make announcement to the exchange. And with regards to the interpretation of the rules 2.1(b) and (c)  of GN 3 which supposedly state that "company's loss equals to or exceed the amount of shareholders' equity and the shareholders' equity is equal to or less than 50% of the issued and paid-up capital for one full financial year loss", my thoughts are as follows:

1) Rule 2.1 (c) requires that “the shareholders' equity is equal to or less than 50% of the issued and paid-up capital for one full financial year loss”. I feel that the phrase “for one full financial year loss” is not necessary as it is more a P&L item. Shareholders’ equity & issued/paid-up capital are Balance Sheet items. This criterion is met if the reduced shareholders’ equity is equal to or less than 50% of the share capital. For SCN, its shareholders’ equity of RM6.247 million as at 31/12/2014 is only 31% of its share capital of RM20.0 million.

2) Rule 2.1 (b) requires that the company's loss equals to or exceeds the amount of shareholders' equity. Now, I must admit I have not read this rule in full. I assume that it is stated correctly. What’s the meaning of loss? Is it accumulated losses or current year loss?

To get a correct interpretation of this rule, I racked through the internet and stumbled upon a Slideshare presentation by Ch’ng Boon Huat, the Head of Issuers Investigation & Surveillance dated July 10, 2009 (here). On slide #5, the prescribed criteria for classification under GN3 were shown. I believe that rules 2.1 (b) is “L1 > SE1”, which mean last year loss is equal to or more than shareholders’ equity "last year". SCN's last year loss of  RM7.1 million exceeded its shareholders’ equity "last year" of RM6.247 million. (Note: I've denoted "last year" shareholders' equity as such because the more accurate description should be shareholders' equity as at end of last year.)

This may be a contestable point. However, it is hard to convince the judge to compare the net loss for FY2014 with the shareholders' equity as at 31/12/2013. I am sure he/she would ask, Why are we comparing with numbers from different periods?


Diagram: GN3 Prescribed Criteria


Table 1: SCNs P&L account as at 31/12/2014 


Table 2: SCNs Balance Sheet as at 31/12/2014

Based on the above, I believe that SCN's suit against Bursa is a long shot. If you are stuck in this stock, you may want to take advantage of the current rebound to reduce your position.

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, SCN.

Petgas: Top-line & bottom-line dropped q-o-q

Results Update

For QE31/3/2015, Petgas's net profit increased by 8% y-o-y to RM450 million on the back of a 4%-increase in revenue. However, net profit dropped 21% q-o-q on the back of a 1%-decline in revenue.

Revenue dropped q-o-q due to lower gas transportation revenue as a result of lower capacity booking number of calender days. Bottom-line dropped q-o-q due to lower share of profits from JVs as a result of recognition of deferred tax assets by Kimanis Power SBarising from investment tax allowance granted by the Min. of Finance in the preceding quarter.


Table: Petgas's last 8 quarterly results

Looking at Chart 1, we can see that Petgas's top-line & bottom-line has been rising steadily over the past 8-9 years. At the same time, its profit margin has also been on a gradual uptrend.


Chart 1: Petgas's last 35 quarterly results

Valuation

Petgas (closed at RM22.20 yesterday) is now trading at a PE of 23x (based on last 4 quarters' EPS of 95 sen). Its dividend yield is fair attractive at 3.1%. At this PE multiple, Petgas is deemed fairly valued.

Technical Outlook

Petgas broke its intermediate uptrend line, SS at RM22.50 in August. Its found support at the horizontal line of RM21.00.


Chart 2: Petgas's monthly chart as at May 12, 2015 (Source: ShareInvestor.com)   


Chart 3: Petgas's monthly chart as at May 12, 2015 (Source: ShareInvestor.com) 

Conclusion

Based on satisfactory financial performance & reasonable valuation, I would maintain my rating for Petgas a HOLD.

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, Petgas.

Tuesday, May 12, 2015

Market Outlook as at May 12, 2015

Today is not a good day for our market. FBMKLCI broke below the previously overcame downtrend line, RR as well as the psychological 1800 support. With these double whammy, FBMKLCI is poised to go lower, possibly testing the 1770-1780 level in the next few days. To avoid this downside trajectory, FBMKLCI must recover above the 1800 mark soon.


Chart 1: FBMKLCI's daily chart as at May 12, 2015_12.30am (Source: ShareInvestor.com)

Over the past few months, we have been adopted a constructive outlook towards the market after the recovery that began in early January. This tinted view of the market is partly a function of a financial market that is flushed with liquidity, courtesy of various central banks around the world that have to prop up their respective economy. The investors has been so accustomed to this condition, which is not unlike a frog who has gotten used to the lukewarm water in a slow boiling pot. Once in a while, we must look at the numbers and the charts to see exactly where we are.

If you look at the monthly chart for FBMKLCI, you will see that the 10-month SMA line has just cut below the 21-month SMA line. The MACD line has not to hooked up, let alone cut above the MACD Signal line. The -DI is still above the +DI and they have again started to diverge. In short, the negative technical outlook is slowly reasserting itself in the market.


Chart 2: FBMKLCI's monthly chart as at May 12, 2015_12.30am (Source: ShareInvestor.com)

The same reading is also present for FBM70.


Chart 3: FBM70s monthly chart as at May 12, 2015_12.30am (Source: ShareInvestor.com)

With the prevailing uncertain condition, we must reduce our trading activities in the market.

Petdag: Bottom-line recovered

Result Update

For QE31/3/2015, Petdag's net profit soared to RM206 million despite a sharp plunge in revenue to RM6.1 billion.
 
Revenue dropped y-o-y due to a 22%-drop in average selling price coupled with a 6%-drop in sales volume. Group operating profit increased y-o-y by RM58.3 million as a result of lower operating expenditure (dropped by RM64.8 million) and higher other  income (rose by RM19.9 million) which had more than offset by lower gross profit dropped by RM26.4 million).

Group operating profit increased q-o-q mainly due to higher gross profit (rose by RM156.8 million) coupled with lower operating expenditure (declined by RM100.1 million). Gross profit dropped in QE31/12/2014 mainly as a result of margin compression in line with the sharp decline in MOPS prices. In addition, operating expenditure, manpower expenses and marketing and promotions expenses were lower in the current quarter compared to the preceding quarter (QE31/12/2014). Higher operating expenditure in QE31/12/2014 was due to higher repair and maintenance activities at petrol stations and terminals.


Table: Petdag's last 8 quarterly results

 
Chart 1: Petdag's last 28 quarterly results

Valuation

Petdag (closed at RM21.64 yesterday) is now trading at a trailing PE of 39 times (based on last 4 quarters' EPS of 55.54 sen). Based on PE multiple, Petdag is overvalued.

Technical Outlook

Petdag tested its long-term uptrend line with support at RM16.00 in November 2014. From there, it staged a good rebound which sent the share price to a recent high of nearly RM23.00. I doubt Petdag is ready to charge through the horizontal resistance at RM23-24. (Note: I have revised the long-term uptrend line as drawn in my previous post.)


Chart 2: Petdag's monthly chart as at May 11, 2015 (Source: ShareInvestor.com)

Conclusion

Despite the improved financial performance & positive technical outlook, I still maintain my rating for Petdag as SELL or REDUCE due to demanding valuation. However, if the share prices were to ease back to the uptrend line (say, RM18), I think Petdag could be 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, Petdag.