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Tuesday, December 16, 2014

Japanese Yen: At the critical juncture

What's happening to the yen? JPY has depreciated by 15% against USD in the past 3 months and as much as 30% against USD since October 2012. See Chart 4 below.


Chart 1: JPY-USD & USD-JPY's weekly chart as at Dec 12, 2014 (Source: Stockcharts.com)

The long-term uptrend for JPY-USD is still intact provided it does not break below the 0.008 mark (or 1 JPY = 0.008 USD). Alternatively, the long-term downtrend for USD-JPY is still intact provided it does not break above the 125 mark (or 1 USD = 125 JPY).

A breakout of this 40-year trend would have serious ramification, which I am not in the position to examine. However, given the difficulty that the Japanese government is facing in trying to revive the economy, one cannot rule out the possibility that Japanese government may adopt extreme measures, including a cheap yen policy to jump-start the moribund economy. The recent electoral victory for Abe could help to strengthen his hands to push through these measures. Who knows?


Chart 1: JPY-USD & USD-JPY's monthly chart from 1960 to Dec 12, 2014 (Source: fxtop.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, JPY and/or USD.

Monday, December 15, 2014

MYR: Due for a rebound!

After a depreciation of 5-6% over the past 2 months, MYR is set to test its technical support. The SGD-MYR chart shows that the SGD is rising against the MYR in an upward channel. The recent weakness in MYR has pushed the SGD to the upper boundary of that channel. For political reason, I do not think it is acceptable for SGD to break above the level of RM2.70. I expect BNM to support the MYR in order to keep SGD-MYR within the upward channel (or not exceeding the 1 SGD = 2.70 MYR.


Chart 1: SGD-MYR's weekly chart as at Dec 15, 2014 (Source: XE Currency Converter)

Similarly, I do not expect MYR to recover lost ground against the THB. MYR is now hanging onto the support of 9400.


Chart 2: MYR-THB's weekly chart as at Dec 15, 2014 (Source: XE Currency Converter)

MYR has however strengthened against the JPY. That's because JPY has weakened substantially since August. Notwithstanding the extremely sharp drop in the value of JPY, it is good to note that MYR-JPY will be coming up against a strong resistance at 36 (or 1 MYR = 36 JPY). The weakness of the JPY will be covered in another article.


Chart 3: MYR-JPY's weekly chart as at Dec 15, 2014 (Source: XE Currency Converter)

All in all, I believe that our MYR is poised for a technical rebound. This could coincide with a temporary bottom for our market, which had been badly mauled over the past 2 months. Where will the bottom be? From the market action today, it seems likely that the 1700 psychological support may not hold. Let's hope that 1600 psychological level will stop the carnage!


Chart 4: FBMKLCI's weekly chart as at Dec 15, 2014 (Source: BTX)

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, MYR, SGD, THB and/or JPY.

Wednesday, December 10, 2014

BJFood: Bottom-line soared due to one-time investment gain

Results Update
For QE31/10/2013, BJFood's net profit increased increased by 26-fold q-o-q or 6-fold y-o-y to RM164 million due mainly to the recognition of the gain of RM158.6 million arising from re-measurement of the 50% equity interest in BStarbucks.

Excluding the one-time net gain of RM158.6 million, the current quarter pre-tax profit of RM6.70 million showed a y-o-y increase of RM1.64 million. The higher pre-tax profit was mainly due to the consolidation of the improved results of BStarbucks arising from more store openings and the contribution of the Brunei Starbucks operations. 

Revenue increased y-o-y due to the effect of consolidation of the newly acquired wholly-owned subsidiary, BStarbucks, as well as the contribution from the Starbucks operations in Brunei, which only commenced operation in February 2014.


Table: BJFood's last 8 quarterly results


Chart 1: BJFood's last 20 quarterly results (excluding the extraordinary gain of RM158.6 million recorded in QE31/10/2014)

Valuation

BJFood (closed at RM2.79 yesterday3) is now trading at a PE of 29 times (based on last 4 quarters' EPS of 9.6 sen, excluding the extraordinary gain of RM158.6 million). At this PE, BJFood is deemed fully valued.

Technical Outlook

BJFood is still in an uptrend line. Its immediate support is the horizontal line at RM2.60. If this support is broken, the stock's next support is at RM2.35.


Chart 3: BJFood's weekly chart as at Dec 9, 2014 (Source: Share Investor)

Conclusion

Based on good financial performance, BJFood is still a good stock to hold for long-term investment. However, it is immediate upside is likely to be limited as its valuation is fairly demanding.

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, BJFood.

SKPetro: A lot cheaper...

Results Update

For QE31/10/2014, SKPetro's net profit increased by 42% y-o-y to RM348 million while revenue increased marginally by 1% to RM2.41 billion. Compared to the immediate preceding quarter, QE31/7/2014, net profit dropped by 22% while revenue declined by 11%.


Table 1: SKPetro's last 8 quarterly results

The y-o-y improvement in bottom-line was attributed to higher contribution from the Drilling & Energy Services ("DES') segment, which experienced a 34%-increase in revenue. This increased revenue offset the drop in revenue from the Offshore Construction & Subsea Services ('OCSS') segment.

The q-o-q decline in bottom-line was attributed to drop in earning by all segments, especially the DES & OCSS segments. These 2 segments experienced lower revenue of 5% & 26%, respectively.



Table 1: SKPetro's segmental results


Chart 1: SKPetro's last 10 quarterly results

Financial Position

As at 31/10/2014, SKPetro's financial position is deemed acceptable, with adequate liquidity albeit slightly elevated leverage. Its current ratio stood at 1.2 times while gearing ratio stood at 1.9 times. Gearing ratio is defined as Total Liabilities over Total Equity. However, if you used Total Borrowings over Total Equity to calculate gearing ratio, then that number would be 1.4 times.

Valuation

SKPetro (closed at RM2.45 yesterday) is now trading at a trailing PE of 8.9 times (based on last 4 quarters' EPS of 27.4 sen). This low PE multiple seems to suggest that SKPetro's earning going forward would drop sharply in line with lower crude oil prices. If this negative scenario does not pan out, then the earning decline would be less and the share price could recover.

Technical Outlook

SKPetro broke its uptrend line at RM4.20 in September. At RM2.45, SKPetro is now trading near its initial quoted prices of RM2.20.


Chart 2: SKPetro's weekly chart as at Dec 9, 2014 (Source: Share Investors)
 
Conclusion

Based on good financial performance & attractive valuation, SKPetro is a good stock to consider for long-term investment, especially after its recent sharp selldown. However, the low prices may persist for a while due to poor technical outlook and depressed prices for crude oil.

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, SKPetro.

Tuesday, December 09, 2014

BJAuto: Bottomline rose on better margin

Results Update

For QE31/10/2014, BJAuto's net profit increased by 2.5% q-o-q or 108% y-o-y to RM58 million while revenue grew marginally q-o-q but rose 80% y-o-y to RM509 million. Revenue growth was marginal because of the contract assembler's paint shop shutdown in October 2014 due to upgrading works. Despite the plant shutdown in October 2014 resulting in less CX-5 CKD model sold, the Group's  pre-tax profit still increased by RM4.5 million or 5.9% primarily due to better gross profit margin.


Table: BJAuto's last 8 quarterly results


Chart 1: BJAuto's last 10 quarterly results
 
Forex Movement

BJAuto is expected to benefit from the weakening of the JPY. Nonetheless, I believe that JPY poised for a technical rebound soon but it will remain weak. It is due to Japanese Central Bank's deliberate policy to weaken the JOY to support its export. This will be good news for BJAuto and other Japanese car distributors.


Chart 2: MYR/JPY & USD/JPY as at Dec 8, 2014 (Source: XE.com)


Valuation

BJAuto (closed at RM3.31 yesterday) is now trading  at a PE of 13.8 times (based on last 4 quarters' EPS of 23.9 sen). With its high growth rate, this PE multiple is deemed reasonable. However, the company expected business prospect to be challenging in the near future due to the implementation of GST and weaker consumer sentiment.

Technical Outlook

BJAuto is in an uptrend. A tentative line can be drawn with support at about RM2.90. 


Chart 3: BJAuto's weekly chart as at Nov 8, 2014 (Source: Share Investors)

Conclusion

Despite weaker financial performance, BJAuto is rated a HOLD based on.attractive valuation & bullish 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, BJAuto.

Wednesday, December 03, 2014

Market Outlook as at December 2, 2014

FBMKLCI tested its recent low of 1766 yesterday - it went as low as 1764 - before rebounding. This market is searching for a bottom. Once that's established, we may see the market trading sideways or begin another upleg. See Chart 1 & Chart 2.


Chart 1: FBMKLCI's weekly chart as at Dec 2, 2014 (Source: BTX)


Chart 2: FBMKLCI's weekly chart from Apr 2011 to Dec 2, 2014 (Source: BTX)

The question is whether the horizontal support od 1760-1770 will hold on the next test. If  we look at the index in July-September 2011, we saw FBMKLCI testing & trying to hold onto the horizontal line at 1470. When that support failed - due to persistent bad news flowing out of Europe - the index dropped to the next 2 levels of support at 1365 & 1300. If the same scenario is played out today, we might see the index testing the 1700 level or even the 1600 level.


Chart 3: FBMKLCI's weekly chart from Nov 2008 to Oct 2011 (Source: BTX)

Meanwhile European markets - represented by DAX - has recovered substantially over the past 4-5 weeks. I am doubtful that the DAX will be able to climb above its violated uptrend line. I believe the rally in DAX could have run its course and the correction is likely to kick in soon.


Chart 4: DAX's daily chart as at Dec 2, 2014 (Source: Stockcharts.com)

Meanwhile Nikkei and US markets - represented by S&P500 - are going higher. However, we can see that Nikkei will have to surpass the line connecting the recent peaks at 17700 and S&P500 will have to do the same at 2080-2100. 


Chart 5: NIKK's daily chart as at Dec 2, 2014 (Source: Stockcharts.com)


Chart 6: S&P500's daily chart as at Dec 2, 2014 (Source: Stockcharts.com)

The question on everyone's lips is when will crude oil prices bottom. I believe that a bottom is not far away. WTIC broke its long-term uptrend line, S-S1 at USD94-95 (if we ignored the prices at the bottom in 2009). If we take the 2009 extreme prices into consideration, the tentative uptrend line support is now at USD50-60. Whether the support is at USD50 or USD60 depends on whether you are drawing the tentative uptrend line using the intra-day low prices or the end of month prices.


Chart 7: WTIC's daily chart as at Dec 2, 2014 (Source: Investorshub)

For those who are crying for higher crude oil prices, this article from Jeremy Grantham in Business Insider on shale oil is worth reading. Grantham, a well-established fund manager, believes that shale oil is a very large red herring. He pointed out that shale oil well's productive period of about 2 years renders many forecasts of US's upcoming crude oil productive prowess a pipe dream, like pigs can flying. Check it out for yourself.

Based on the above, I believe that we can consider slow buying in the market now, especially for O&G stocks that had been badly sold down. My preference is for large well-capitalized O&G stocks such as Armada & UMWOG.

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 stocks or indices shown above.

Wednesday, November 26, 2014

DLady: Improved performance but demanding valuation persists

Result Update

For QE30/9/2014, DLady's net profit increased by 18% q-o-q but dropped by 32% y-o-y to RM28.5 million while its revenue dropped by 10% q-o-q or 9% y-o-y to RM240 million. Revenue dropped q-o-q mainly contributed by lower volume sales. Nevertheless the profit before taxation for increased by RM5.8 million mainly due to cost management and favorable movement in raw material purchases


Table: DLady's last 8 quarterly results


Chart 1: DLady's last 26 quarterly results

Valuation

DLady (closed at RM45.90 yesterday) is now trading at a PE of 27 times (based on last 4 quarters' EPS of 169 sen). At this PE, DLady is deemed fully valued.

Technical Outlook

Since October 2012, DLady has been moving sideways around RM46-48. Its indicators have weakened steadily, with monthly MACD hooked down & William %R at the 50-mark. A breakout of the trading range of RM46-48 will point the way forward for the stock.


Chart 2: DLady's weekly chart as at Nov 25, 2014 (Source: Share Investor)

Conclusion

Based on demanding valuation & technical weakness, I would rate DLady as a REDUCE.

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, DLady.

Johotin: The recovery begins?

Results Update

For QE30/9/2014, Johotin reported a pre-tax profit of RM4.0 million as compared to a pre-tax loss of RM548k incurred in QE30/6/2014. Revenue rose 54% q-o-q to RM91 million due to the commencement of operation if its new factory in Teluk Panglima Garang, Selangor. which is involved in milk powder business and the manufacturing of retail packs for milk powder.

In the past 2 quarters, its financial performance was affected by product quality issue in the F&B segment. This problem arose due to the cans not totally dry when they were passed through the dryer in its production process line. The water residue inside the cans led to yeast built-up & the contamination of the product.

In QE30/6/2014, Johore Tin replaced the affected which led to a drop in revenue fell to RM58.8 million from RM61.5 million and the ensuing losses. This issue was fully settled by QE30/9/2014 and would not have any impact on Johotin's results going forward.


Table 1: Johotin's last 8 quarterly results


Chart 1: Johotin's last 20 quarterly results 

Valuation
Johotin (closed at RM1.44 yesterday) is now trading at a trailing PE of 11 times (based on last 4 quarters' EPS of 13.2 sen). At this PE, the stock is deemed fully valued. However, the company expects revenue to grow to RM350 million in FY15 and based on profit margin of 8.6%, its net profit could be RM30 million. this would translate to a EPS of 32 sen. Assuming a conservative PE of 10 times, Johotin's fair value would be RM3.20.

Note: The revenue ot RM350 million in FY15 will consist of revenue from F&B segment of RM250 million (from new business operation carried out in the new factory in Selangor) and steady growth of 5-10% from tin manufacturing which will include a new 6-color flat sheet printing line to be commissioned in January 2015.

Technical Outlook

Johotin is in an uptrend line, with support at RM1.40.


Chart 2: Johotin's monthly chart as at Nov 25, 2014  (Source: Share Investor)

Conclusion

Despite the improving financial performance and positive technical outlook, Johotin is 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, Johotin.

Tuesday, November 25, 2014

Brahim: Next upleg beckons?

Not long ago, Brahim was a hot stock. It has a fast-growing food business - supplying meals to airlines - and another sure winner waiting for take-off - the sugar refinery in Sarawak. After its biggest airline customer, MAS suffered the unprecedented loss of 2 planes in less than a year and has to undergo adrastic restructuring, Brahim's future looks rather bleak. It may have to lose the profitable airline meal supply business when the existing contract with MAS is renegotiated.

From the charts below, we can see that Brahim has dropped from its  recent high of RM2.70 recorded in March 2014 to a recent low of just below RM1.20. It tested its long-term uptrend line and rebounded.


Chart 1: Brahim's weekly chart as at Nov 24, 2014 (Source: Tradesignum)

From the daily chart, we can see that Brahim has broken above the downtrend. In addition, a short-term uptrend line has formed. If the stock on weakness does not break below the RM1.40, the recovery for Brahim could be starting.


Chart 1: Brahim's daily chart as at Nov 24, 2014 (Source: Tradesignum)

Based on technical breakout, Brahim could be 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, Brahim.

NCB: Cheap enough?

New Development


It is reported in The Edge that Tan Sri Syed Mokhtar Albukhary's 51.76%-controlled MMC Corp Bhd is in talks with MISC Bhd to buy the latter’s 15.73%-stake in loss-making NCB Holdings Bhd. A source noted that NCB might be used as a listed vehicle for the backdoor listing of Syed Mokhtar’s port businesses, such as Port of Tanjung Pelepas (PTP) in southern Johor and Penang Port. For more, go here.

Recent Results Update

For QE30/9/2014, NCB reported a net loss of RM2.3 million as compared to a net profit of RM2.8 million recorded in QE30/6/2014 or RM27 million recorded last year. The loss was attributed to lower revenue registered for the third quarter plus higher operating, depreciation and amortization costs and interest expenses.

The results for NCB over the past 3 quarters was affected by adjustment made in the book of its ailing subsidiary, Kontena Nasional Bhd ('KNB'). It was reported that a special review of KNB's books by Pricewaterhouse Coopers had revealed that KNB's revenue was being inflated, while operating expenditure was being suppressed. KNB’s adjustments amounted to RM56.6 million, out of which RM32 million was accrual of costs while an additional RM24.6 million was over recognition of revenue spanning from 2010 to 2013.


Table: NCB's last 8 quarterly results


Chart 1: NCBs last 26 quarterly results

Valuation

NCB (at RM2.33 yesterday) is now trading at a PB of 0.8 time.As the company's earning is negligible, the PE computed is meaningless.

Technical Outlook

NCB has retreated back to its gradual long-term uptrend line at RM2.40. This coincides with its horizontal line of RM2.40.


 Chart 2: NCB's monthly chart as at Nov 24, 2014 (Source: Share Investors)


Conclusion

Despite the poor financial performance, NCB may be worth considering for a long-term investment due to its substantial decline. The drop has brought out value in the stock as it trades at 0.8x its NTA per share. It has tested its long-term uptrend line and could slowly recover from here.

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, NCB.

Parkson: China Syndrome?

Results Update

For QE30/9/2014, Parkson's net profit dropped by 25% q-o-q or 34% y-o-y to RM20 million while revenue inched up 4% q-o-q or 2% y-o-y to RM848 million. Revenue increased q-o-q due Muslim's festive season in Malaysia & Indonesia. Pre-tax profit dropped due to the challenging retailing operations in China, which is the result of the proliferation of e-commerce operation & weak discretionary spending. This has a negative impact on Parkson China's SSS growth.


Table: Parkson's last 8 quarterly results


Chart 1: Parkson's last 31 quarterly results 

Valuation

Parkson (closed at RM2.48 yesterday) is now trading at a trailing PE of 20 times (based on last 4 quarters' EPS of 12.1 sen). If you expect the Chinese economy to recover in the near term, then we can expect Parkson's results to improve, leading to the rollback of the current high PE. Without an increased earning, Parkson's valuation is demanding.

Technical Outlook

Parkson has been in a downtrend since 2008. It is struggling to hang onto the support of RM2.50. If that support failed, then its next support is at the horizontal line of RM2.20 and then the psychological RM2.00 mark. Its immediate resistance is at RM3.00.


Chart 2: Parkson's monthly chart as at Nov 24, 2014 (Source: Share Investor)


Conclusion

Despite the poor financial performance for the past 2-3 years & bearish technical outlook, Parkson is a stock worth watching because it has dropped so much. I believe that the RM2.50 level is a strong support and the base for a bottoming phrase for this stock. If you are a contrarian, you might start to slowly accumulate this 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, Parkson.