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Wednesday, February 10, 2016

MISC: Earnings rose due to early profit recognition

Results Update

For QE31/12/2015, MISC's net profit increased by 56% q-o-q but dropped 22% y-o-y to RM753 million while revenue rose 32% q-o-q or 45% y-o-y to RM3.3 billion. Revenue increased q-o-q due to recognition of EPC revenue for a finance lease asset under construction in Offshore business. Profits also increased q-o-q mainly due to recognition of compensation for early termination of term contracts for 2 vessels in LNG business. The latter - being a compensation for contracts terminated- means that future earning will be affected. The former which could lead to early recognition of earning may "borrow" against future earning. Both of these would suggest that earning in the future could be lower than what's reported now.


 Table: MISC's last 8 quarterly results


Chart 1: MISC's last 38 quarterly results

Valuation

MISC (RM8.48 last Friday) is now trading at a PE of 15.4.times (based on last 4 quarterly EPS of 55 sen). At this PE, MISC is deemed fully valued.

Technical Outlook

MISC is in an uptrend line with support at RM8.30-8.40. If this support is violated, MISC may drop to its strong horizontal support at RM7.50.


Chart 2: MISC's weekly chart as at Feb 5, 2016 (Source: ShareInvestor.com)


Chart 3: MISC's monthly chart as at Feb 5, 2016 (Source: ShareInvestor.com)

Conclusion
Based on challenging outlook ahead and full valuation, MISC is a good stock to be avoided for now. For those who have the stock, you can only hope that the uptrend line support at RM8.30-8.40 would remain intact. Thus, MISC's rating is maintained as 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, MISC.

Sunday, February 07, 2016

Happy Chinese New Year


I like to wish all my Chinese readers a very happy and prosperous New Year. May the Year of the Monkey give you the agility and smartness to navigate the challenging year ahead. Gong Xi Fa Cai...


Source Scenicworld.com

Thursday, February 04, 2016

RCECap: Recovery continued

Result Update

For QE31/12/2015, RCECap's bottom-line continued to improve. Its net profit rose 27% q-o-q or 315% y-o-y to RM13.0 million on the back of higher revenue (up 6.4% q-o-q or 23.9% y-o-y to RM42 million). Net profit increased q-o-q mainly due to higher interest income by RM2.5 million


Table: RCECap's last 8 quarterly results

Looking at the Chart 1, we can see that RCECap's financial performance continued to crawl up after bottoming in last 2013.


Chart 1: RCECap's last 35 quarterly results

Valuation
RCECap (closed at RM0.255 yesterday) is now trading at a PE of 7.5 times (based on last 4 quarters' EPS of 3.42 sen). Price to book ratio stood at 0.7 time (based on NTA of RM0.35 per share).

Technical Outlook

RCECap is now rising in an upward channel with support at the lower line at RM0.25 and resistance at the upper line at RM0.35.


Chart 2: RCECap's monthly chart as at Feb 3, 2016 (Powered by ShareInvestor.com)

Conclusion

Based on improved financial performance, fair valuation & positive technical outlook, RCECap is 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, RCECap.

F&N: Earnings soared

Result Update

For QE31/12/2015, F&N's net profit rose jumped by 167% q-o-q or 117% y-o-y to RM152 million while revenue was up 4.5% q-o-q or 1.6% y-o-y to RM1.05 billion. Profits increased partly  attributed to higher revenue, effective product/sales mix (particularly on its main brands) and pricing management and favorable milk-based commodity prices, insurance claim of RM4.1 million (from the East Coast flood) and recovery of withholding on royalties paid in previous years of RM8.5 million. Even if the 2 last items are excluded, the recurring net profit would still be very impressive at RM139 million- an increase of 145% q-o-q or 99% y-o-y!!


Table: F&N's last 8 quarterly results


Chart 1: F&N's last 37 quarterly results

Valuation
F&N (closed at RM18.56 yesterday) is now trading at a PE of 19 times (based on last 4 quarters' EPS of 98.9 sen). At this PE multiple, F&N is deemed fairly valued.

Technical Outlook

F&N has been range-bound for the past 4 years between RM16.00 and RM19.00.A breakout of this trading range would determine the direction of the price movement going forward.


Chart 2: F&N's monthly chart as at Feb 3, 2016 (Source: ShareInvestor.com)

Conclusion

Based on strong improvement in its financial performance and less-demanding valuation, F&N is upgraded from a HOLD to a long-term 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, F&N.

Wednesday, February 03, 2016

PBBank: Earning soared

Result Update

For QE31/12/2015, PBBank's net profit rose 24% q-o-q or 19% y-o-y to RM1.49 billion while revenue increased by less than 1% q-o-q or 9% y-o-y to RM4.93 billion. Profits rose mainly due to the net writeback of loan impairment allowances during the current period and higher net interest income.


Table: PBBank's last 8 quarterly results

From the chart below, we can see that PBBank's profits & profit margins rose while revenue hardly inched up.


Chart 1: PBBank's last 40 quarterly results

Valuation

PBBank (closed at RM18.38 today) is now trading at a PE of 14.0 times (based on last 4 quarters' EPS of 131 sen). At this PE multiple, PBBank is deemed reasonably priced. It pays a dividend yield of 3%.

Technical Outlook

PBBank is still in a long-term uptrend line, with support at RM18.00.


Chart 2: PBBank's monthly chart as at Feb 3, 2016 (Source: ShareInvestor.com)

PBBank seems to be trapped in a descending triangle for the past 2 years. The support is at RM17.40-17.50. An upside breakout of the downtrend line, RR (or the upper line of the triangle) at RM19.00 could signal the continuation of the long-term uptrend line.


Chart 2: PBBank's weekly chart as at Feb 3, 2016 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance, reasonable valuation & neutral technical outlook, PBBank 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, PBBank

Shell: Déjà vu all over again!



Yogi Berra is a successful American baseball player who had an amazing ability to say the funniest one-liners. In Malaysia, we also have a whole bunch of yogis who have achieved various degree of success; some are even holding high position in our Government. I'm digressing...

Today, we have a comment from Datuk Moehamad Izat Emir, the President of The Malay Businessmen and Industrialist Association of Malaysia (Perdasama), saying that Perdasama is aware of a local buyer who offered to buy the stake in ShellM at between RM4.00 & RM4.20 per share. He even asked the rhetorical question: Why Shell chose to sell at this (low) price to a foreign company and incur massive losses? This was reported by The Edge Financial Daily.

I have never heard of Perdasama nor its President, Datuk Moehamad before this. If you have shares of ShellM, your natural tendency on reading this 'news' would be to see whether this mysterious buyer would quickly surface. 

However, we must be careful not be swayed by pure conjecture dressed up as a 'news' item. If there is a serious buyer at the stated price of RM4.00-4.20 per share, Royal Dutch Shell group would certainly accept the offer. Since the deal is done at RM1.80 per share, it is very likely that there is no such offer. 

In addition, Datuk Moehamad's rhetorical question seems to suggest something devious; that the transacted price of RM1.80 per share is less than the agreed purchase consideration. What he may be hinting at is that part of the purchase consideration is settled between the parties separately. Such a contract would be the opposite of the 'norm' in Malaysia contracting scene where the true transacted price is less than the announced price; with the difference paid into the personal accounts of the executives signing for one side or both sides of the deal. The effect of this 'cunning maneuver' by Royal Dutch Shell group would be to cause the minority shareholders to suffer substantial loss. I don't believe Royal Dutch Shell group would deceive its local partners, especially a sophisticated investor like EPF.

This deal reminded me of  San Miguel's acquisition of Esso Malaysia in 2011. At that time, there were reports that Exxon, the holding company of Esso Malaysia, should have waited for a better price to sell its 65%-stake in Esso Malaysia. LTAT was even reported to have made a higher offer which was not accepted. (Why?) For more, go here.  

Any shareholders of Esso Malaysia who held out for a better price would have regretted their decision until recently. Thanks to favorable crack spread, Esso Malaysia (now, PetronM) has enjoyed bumper profits for the past 3 quarters which have pushed up its share price substantially. Whether the same favorable outcome would happen in the future for ShellM would depend on many things, including how the mandatory GO for ShellM's minority shares would eventually be resolved. 

There are 2 scenarios:
1) The buyer, Malaysian Hengyuan International Ltd ('MHL") may privatize ShellM in order to restructure the entire operation
2) MHL may keep the listing of ShellM because the business of refinery is capital-intensive and, as the record shows, only marginally profitable.

If MHL opts to privatize, your losses would take effect immediately. If MHL chooses to keep the listing, your stock may have a chance to rebound back. You must ask yourself this question: Is there a reason to take the risk of holding onto ShellM as compared to selling off at the current price of RM3.70 today? Investors must be realistic and make decision based on fact, not pure conjecture!!

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 inthe acquisition or disposal of, Shell and PetronM.

Tuesday, February 02, 2016

Shell: A Shocker?!

This morning we have the news of Royal Dutch Shell group disposing its 51%-stake in Shell Refining Company (Federation of Malaya) Bhd ("ShellM") for RM276 million (or RM1.80 per share). The headline implies that the selling price was unexpected. Is it?

In July 2015, I projected that the stake may be sold for as little as RM1.19 per share based on the same formula that arrived at the selling price of Exxon group's 65%-stake in Esso Malaysia Bhd. Thus the selling of RM1.80 was a 50% higher than my computation. 

The reasons for the sale by Royal Dutch Shell group are were:
1) the need to invest in upgrading the refinery plant to (meet) Euro 4M & Euro 5 requirement
2) the consistent level of losses recorded
ShellM did not mention the amount of  capex to upgrade the refinery plant but we know that the company achieved the following results overin the past 9 years:
1) Revenue: RM108 billion
2) Pre-tax loss: RM667 million
3) Net loss: RM688 million
This is clearly shown by the chart below:

 
Chart 1: Shell's last 36 quarterly result

I have appended below the charts of ShellM and PetronM. Due to the sharp rally in PetronM in response to its outstanding profit in the past 3 quarters, Shell also rallied 3 weeks ago to a high of RM6.30. Today, the sweet memory of that rally would probably still linger in the mind of its shareholders. The quicker you shake of that memory, the sooner you would be able to take the decisive action to sell off your Shell shares. Shell which was last traded at RM4.94- a good RM3.14 above the transacted price agreed by Royal Dutch Shell group.


Chart 2: ShellM's weekly chart as at Jan 29, 2016 (Source: ShareInvestor.com)

Those investors who are fortunate enough to have bought into PetronM is reminded again that you should continue to take profit on that stock. Its last 3 quarters of sterling financial results is due to favorable crack spread- something which may not hold for long. See my earlier report on PetronM.


Chart 3: PetronM's weekly chart as at Jan 29, 2016 (Source: ShareInvestor.com)

Based on the above, it is recommended a SELL rating for both ShellM and PetronM.

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, ShellM & PetronM.

Friday, January 29, 2016

Telcos hit by hefty bill to retain their spectrum

As reported in the Star newspaper, the government has announced that it will optimise the revenue from telecommunication spectrum through a redistribution and bidding process that will be implemented soon. This was announced under the revised Budget 2016.

According to a CIMB report, if "the MCMC uses the same reserve price benchmark (as per the recent Thai auctions), the minimum Maxis, Celcom and DiGi would have to pay to retain their 900MHz and 1800MHz spectrum are RM2.37bn, RM2.43bn and RM1.46bn, respectively. This would shave off 4.7% of our target price for Maxis, 4.2% for Axiata and 3.8% for DiGi."

The reaction from the market was swift. All three stocks dropped substantially this morning. Both Maxis and Axiata broke their strong horizontal support at RM6.20 & RM5.60 respectively. Digi dropped less and may find support at its horizontal line at RM4.60. As the current prices are still above the revised fair prices for all three counters (as per CIMB's report), it is best to avoid these stocks for now.

Chart 1; Axiata's monthly chart as at Jan 29, 2016_10.45am (Source: ShareInvestor)


Chart 2: Maxis's monthly chart as at Jan 29, 2016_10.45am (Source: ShareInvestor)


Chart 3: Digi's monthly chart as at Jan 29, 2016_10.45am (Source: ShareInvestor)

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, Axiata, Digi & Axiata.

MYR Recovery Begins?

In November last year, I posted about a tentative MYR recovery. Those in the market long enough will learn -as I did - that markets have a perverse way of proving us wrong at every opportunity. That call was no exception.

USD-MYR & SGD-MYR actually went up after the November call. However today our MYR strengthens against both these currencies- set the stage for a possible bearish reversal. See the two charts below.

 
Chart1: USD-MYR's weekly chart as at Jan 29, 2016_10.45am (Source: Investing.com)


Chart 2: SGD-MYR's weekly chart as at Jan 29, 2016_10.45am (Source: Investing.com)

In my earlier post, I have recommended that investors should take profit on those trades that were based on a weakened MYR. If you have done so, you would be a happier man. See the sharp drop for rubber glove producers below.


Chart 3: Harta's weekly chart as at Jan 29, 2016_10.45am (Source: ShareInvestor)


Chart 4: Topglov's weekly chart as at Jan 29, 2016_10.45am (Source: ShareInvestor)


Chart 5: Kossan's weekly chart as at Jan 29, 2016_10.45am (Source: ShareInvestor)

On the other hand, you would have made a decent profit if you had positioned in the opposite side - based on a strengthening MYR - by buying into stocks which were weighed down by USD borrowings (example: Tenaga) or importers (examples: automakers).

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, Harta, Topglov, Kossan & Tenaga.

Spritzr: Earnings rose marginally q-o-q

Result Update

For QE30/11/2015, Spritzr's net profit increased marginally by 1.5% q-o-q & 114% y-o-y to RM7.4 million. Revenue was mixed- dropped 1.6% q-o-q but rose 13% y-o-y to RM66 million. Revenue increased y-o-y due to increased sales volume of bottled water products & packaging material as well as better selling prices. This plus reduction in the cost of packaging material costs led to a y-o-y jump in profits.


Table: Spritzr's last 8 quarterly results


Chart 1: Spritzr's last 38 quarterly results

Valuation

Spritzr (closed at RM2.33 yesterday) is now trading at a PE of 12 times (based on last 4 quarters' EPS of 19.38 sen). At this PER, Spritzr is still deemed attractive for a consumer stock.

Technical Outlook

Spritzr is in a long-term uptrend line, with support at RM2.00. Its immediate resistance at the horizontal line at RM2.40.


Chart 2: Spritzr's monthly chart as at Jan 28, 2015-6  (Source: ShareInvestor.com)

The medium-term chart shows immediate support at RM2.15.


Chart 3: Spritzr's daily chart as at Jan 28, 2015-6  (Source: ShareInvestor.com)

Conclusion

Based on satisfactory financial performance, attractive valuation and mildly positive technical outlook, Spritzr 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, Spritzr.

MPI: Earnings dropped sequentially

 Result Update

For QE31/12/2015, MPI's net profit dropped 30% q-o-q but rose 37% y-o-y to RM43 million. Profits dropped q-o-q due to lower revenue & forex differences. Revenue dropped q-o-q from RM387 million to RM380 million due to 1%-increase in revenue for USA but decline for Europe and Asia of 1% & 4% respectively.


Table: MPI's last 8 quarterly results


Chart 1: MPI's last 36 quarterly results 

Industrial Outlook

Semiconductor may have peaked in this cycle. This may explain the pullback in MPI's latest quarterly revenue- despite the weakening of MYR vis-a-vis USD.


Chart 2: SOX's weekly chart as at Jan 28 2016 (Source: Stockcharts.com)

Valuation

MPI (closed at RM8.66 yesterday) is now trading at a trailing PER of 11.4 times (based on last 4 quarters' EPS of 76 sen). At this PE multiple, MPI is deemed fairly attractive.

Technical Outlook

MPI failed to surpass its strong horizontal resistance at RM10.00. This led to a sharp correction over the past 4 weeks.

 
Chart 3: MPI's monthly chart as at Jan 28 2016 (Source: ShareInvestor.com)

On weakness, MPI may find support at the horizontal line at RM7.25 or the uptrend line at RM7.00.
 
   
Chart 4: MPI's weekly chart as at Nov 17, 2015 (Source: ShareInvestor.com)

Conclusion

Despite the sharp correction in the past 4 weeks, MPI's long-term technical outlook remains positive. Thus it still deserves to be rated a HOLD. However, its upside may be limited as its valuation is no longer cheap. In addition, the concern going forward is whether the pullback in SOX will signal the end of the current up-cycle for semiconductor. If so, we may see further weak earnings ahead.

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.

Thursday, January 28, 2016

Takaful: Earnings improved on higher fee income

Results Update

For QE31/12/2015, Takaful's net profit increased by 6% q-o-q or 22% y-o-y to RM36 million while revenue rose marginally by 4% q-o-q or 0.5% y-o-y to RM403 million. Revenue increased marginally y-o-y mainly attributable to higher sales generated by Family Takaful business. Its profit before zakat and taxation increased y-o-y mainly attributable to higher wakalah fee income.


Table: Takaful's last 8 quarters' results

From the Chart 1 below, we can see that the revenue is on the uptrend. Profit margin rose steadily over the past 4 quarters. The increased profit margin helped to stabilized the profit numbers despite lower revenue over the past 3 quarters.


Chart 1: Takaful's last 39 quarters' results

Valuation

Takaful closed at RM3.76 yesterday. This means that Takaful is now trading at a PE of 19.6 times (based on the last 4 quarters' EPS of 19.2 sen). At this PE multiple, Takaful is deemed fully valued.

Technical Outlook

The stock has been in an uptrend in the past 4 years. However its movement was sideways for the past 6-7 months after the share split of 1-to-5. Considering 500%-increase in the outstanding shares, Takaful's share price movement has been fairly encouraging.


Chart 2: Takaful's monthly chart as at Jan 27, 2016 (Source: ShareInvestor)

Conclusion

Based on satisfactory financial performance & positive technical outlook, Takaful is still a good stock for long-term investment. However, its upside potential is limited as the stock is fully-valued.

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, Takaful.