Happy Chinese New Year 2011

May the readers of this website enjoy a prosperous and great year ahead and blessed with good health.

5 Things To Know Before KLCI Opening Bell

1. DJIA lost 166.13 points last Friday to 11823.70 as fear over Egypt put an end to the market's 8-week win streak (This is NEGATIVE to KLCI)

2.BN won Tenang by-election with an increased majority of 3,707 votes... better than 2,492-vote majority won during the 2008 general election. (This is POSITIVE to KLCI as investors may see this as an increasing support for BN and put higher expectation of General Election to happen this year)


3. Bank Negara Malaysia maintained interest rate at 2.75% last Friday. However, BNM warned that it will have to manage the rising amount of money building up in the domestic financial system. (This is NEUTRAL as investors have generally expected BNM to do so)

4. The latest update on Egypt unrest = i) it is already 6th day of the demonstration, ii) as many as 150 people have been killed in the unrest, iii) despite Mubarak’s appointment of the first vice president since his rise to power in 198, the demonstration goes on, iv) Suleiman has met with the interior and defense ministers to discuss a plan to restore security... for full latest story please read  Egpty Update as of 640am

5. Feb-2011 Futures KLCI is now trading at 1496 points, about 26 points discount to the cash market close of 1521.89 last Friday. (NEGATIVE)

Overall = NEGATIVE but I think 1500 support should be able to hold.

KLCI to breach 1600 by 16-March-2011? Pre-CNY sell down is OVER?

This blog will be short as the pictures will tell the story...

This is 2010 KLCI:

And this is 2011, will history repeat itself?

Similar V-shape pattern in KLCI today vs DJIA 1000 points dip?

This is the graph for today KLCI as of afternoon close...

AND ... this is the graph for DJIA on 6-May-2010 (the day when it drop 1000 points at one time)

Yes, it's the deep V-shape recovery... 

CI Holding 2Q2011 Result

1. Let's compare CI HOLDGINDS result against the average analyst expectation for FY2010:

Net income: Average analyst expectation FY2011 = RM42.83m, 1H2011 net income = RM23.05m
Earnings per share or EPS: Average analyst expectation FY2011 = 30.3 sen, 1H2011 EPS = 16.23sen
Overall, the 1H2011 Result is better than analyst expectation with 1H2011 net income already making 53.8% of consensus estimate

2. 2Q2010 net income of RM11.28m is an increase of 43% y-o-y but a 4% decrease qoq. In the announcement to Bursa, CIHLDG mentioned that "The higher profit after tax was mainly attributed to further economies of scale and prudent cost management"

3. Average analyst target price: RM4.81 as of time of writing, range of targetp price Range RM4.65 to RM4.90

4. Interim dividend of 5 sen less income tax of 25% was announced, ex-date = 16-Feb-2011

5. CI HOLDING BHD is trading at forward PER ending Dec 11of 10.89x, which is lower than F&N 16.63x.


My view: Overall, the 2Q2011 result is better than the market expectation. With RSI at 36.4 (almost Oversold), the time should have come for this share to move upwards.

Feb-2011 futures drop 44.5 points!!! Algo Trading or Key In Error?

Feb-2011 futures drop 44.5 points at one time this morning to 1477.5 points. The huge drop may have caused by:
i) Algorithm trading rules set by futures player in which orders to SHORT are executed when the index broke below certain support level
ii) Key in error in which the futures dealers key in the customer order to short wrongly

Today's V-shape recovery of index may have been caused by this as well.

At 9.16am, Feb-2011 Futures plunged 44.5points to 1477.5, KLCI was around 1515 to 1519.
At 9.19am, Feb-2011 Futures recovered to 1500, KLCI plunged to lowest point of 1505.36 points


Conclusion:
Feb-2011 plunge seems to have lead to huge sell off for index linked stock this morning.

PUBLIC BANK FY2010 RESULT

1. Let's compare PUBLIC BANK result against the average analyst expectation for FY2010:

Net income: Average analyst expectation = RM2962m, Real = RM3048m
Earnings per share or EPS: Average analyst expectation = 89.4 sen, Real = 87.18sen
Overall, the FY2010 Result is within analyst expectation with net income 2.9% better than expected but EPS 2.5% lower than expected.

2. Comparing FY2010 against FY2009 shows that revenue improved 13.6% while net income increased 21.1%. In the Press Release gathered from Bursa, Public Bank's Chairman stated that the improved financial performance was mainly driven by the strong growth in net interest and finance income and higher non-interest income, coupled with lower loan impairment allowances.

3. Average analyst target price: RM13.86 as of time of writing

4. 2nd interim dividend of 33 sen was announced, ex-date = 10-Feb-2011

5. My view: Overall, the result is within market expectation. However, investors may assign some upside to PBBANK due to the 33 sen gross dividend announced. Or at least the 33 sen dividend will serve as a good share price support for the stock.

Public Bank Result Preview

According to a research reprot from Affin Inv Bank, Public Bank or PBBANK will announce its 4th quarter and FY2010 result tomorrow during lunch break. Here's some of the information that you may find useful...


a. Market expectation for FY2010:

Revenue: RM6958m
Net income: RM2962m
Earnings per share or EPS to be 89.4 sen per share

b. Average analyst target price: RM13.86

c. My view:
Check out the Bursa announcement tomorrow during lunch break to see whether there is any major earnings surprise. Normally any earnings surprise of more than 10% will be positive. In this case, if PBBANK EPS turns out to be more than 98.3 sen, then it is positive. Also you may apply the BUY AHEAD OF DIVIDEND strategy, as PBBANK should announce dividend during tomorrow lunch break. AFFIN INV BANK is expecting PBBANK to deliver FY2010 full year gross dividend of 58 sen per share. (which indirectly hinting towards expecting 33 sen gross dividend to be announced tomorrow).

3 Signs That Foreign Fund Are Selling

KLCI has been relatively weak this week and likely to go down also today.
Keep it short and simple... let's look at 3 signs that foreign funds are selling:

1. Exceptionally huge sell volume at the morning market in the big caps
    CIMB - 9:00:09am - SELL 320800 shares at RM8.59 in a deal worth around RM2.756m
    PCHEM - 9:00:02am - SELL 666800 shares at RM6.30 in a deal worth around RM4.2m
    MAYBANK - 9:00:02am - SELL 157500 shares at RM8.88 in a deal worth around RM1.4m
 
The huge volume and value of transaction suggested that these are big players. And the urgency in their trade to sell at market price suggest they are foreign funds.


2. Weaker RM against USD and Euro
On 17-Jan (Monday) the exchange rate was RM3.0585 per USD and RM4.0597 per Euro
As of time of writing, the rate is RM3.0633 per USD and RM4.1250 per Euro

In short, RM has been weaker against USD and Euro since early this week, indicating foreign fund from US and Euro may have sell off their position and exchange RM into their home currency... causing weakness in RM.

3. Regional South East Asia index are facing pressure as well
Indonesia: Last Friday close at 3569.14... as of writing time = 3454.12 (down 3.25% so far)
Philippine: Last Friday close at 4132.04... as of writing time = 4006.24 (down 3.04% so far)

Normally, global fund managers like to invest based on themes, e.g. growth in emerging market such as South East Asia... The similar downtrend across South East Asia suggested that foreign funds are trimming their positions on South East Asia... meaning Malaysia is part of their selling as well...

So what to do?
If you are active investors, short market by selling some shares that you own, hoping to buy back at cheaper position after Chinese New Year.
If you are passive investors, then do nothing, wait for better value to buy after Chinese New Year.

MITRA: Share Split + Bonus Issue + Free Warrant !!!

During the lunch break, MITRA proposed :

i) one-into-two share split
ii) after split, bonus issue of 1 share for every 2 shares held
iii) free 1 warrant for every 8 shares held

The stock is suspended from 230pm until 330pm today.


My view:
At the first glance, it seems like everything is free. Normally, bonus issue is enough to influence share movement upwards. This one is 3 in 1!!! Split + Bonus + Free Warrant! Where to get? I think RM2.00 should serve as the ceiling for the stock for the evening trading based on: i) psycological ceiling, ii) historical PER of 6.21x. If MITRA can break RM2.00, then RM2.20 shall be the next resistance.



A closer look however shows that MITRA has warrant which will mature on 12-Feb-2011 with the last date of exercise is 11-Feb-2011 5pm (Friday). The exercise price for this warrant is RM1.80 and is convertible into mother share.

If you are a warrant player, calculating the fair value of MITRA-WB is quite straight forward, just minus RM1.80 from the mother share assuming 0 time value for the warrant. E.g. if mother share is RM2.00, then MITRA-WB should worth RM0.20.


Last point is it is very rare to see Company which suspend a counter for 1 hour! How can investor use 1 hour to determine the effect of the Company?

DXN 3Q2011 Result

Revenue for 3Q2011 up 3.6% to RM64.6m while 9MYTD revenue grow 7.5% to RM214.8m. The increase in revenue was due to the Multi Level Marketing segment revenue growth albeit property and others segment revenue contribution declined.

However, 9MYTD net income surged 47.8% to RM34.4m. 3Q2011 net income up 32.9% to RM12.0m.

Dividend of 3 sen was announced, with the ex-date to be announced at a later date.


Company background:
DXN Holdings Berhad sells, manufactures, and trades health food supplements and products, traditional medicine, vitamin supplements, confectioneries, and other food products. The company operates as a Multi Level Marketing company with their main product produced using Ling Zhi.

At yesterday close of RM1.50, the stock is currently trading at 9.4x Price to Earnings Ratio, which is lower than HAIO’s 13.5x but higher than ZHULIAN’s  7.9x.

There are no analyst covering the stock actively. However, if the market values DXN at 9.0x PER of annualized FY2011 earnings of 19.06 sen, the stock has potential to go up to RM1.72, representing potential upside of 14.7% from the current price of RM1.50.

From technical view, DXN RSI is neutral at 64.31. (as of yesterday close).

3 Updates on AXIATA

As usual, keep it short and simple, 3 updates about AXIATA:

1. I have mentioned about AXIATA on 25-Nov-2010 when the price was at RM4.72. The stock has appreciated 20 sen to RM4.92 as of yesterday close. To recall, Axiata has announced its dividend policy of minimum 30% of its net income on 25-Aug-2010. Once the Company starts its payment in FY2011, AXIATA is poised to gain more recognition from investors.

2. Out of 28 analysts covering the stocks, 22 are calling BUY call and 4 Hold call and 2 SELL. Average Target Price is RM5.37, Lowest: RM4.03 and Highest: RM6.40.

3. However from technical view, AXIATA RSI is OVERBOUGHT at 71.29.

In short, fundamentally good stock but I will have to wait at slightly cheaper price to get better value.

CRESNDO dividend going ex tomorrow

Just a short message here to inform that CRESNDO's 2nd interim dividend of 2 sen will go ex tomorrow. This means that today will be the last day in which you are still entitled to the dividend.

However, after the ex, the share price will reflect the 2 sen dividend paid out.

MAMEE: Someone key in wrong order to BUY?

MAMEE gained RM1.00 or 28.7% to RM4.48 with 10000 shares traded at this price. This is quite unusual. Based on yesterday close price of RM3.48, I guess that someone have key in BUY order wrongly.

Lesson learnt:

1. Check your order 3 times before keying in (for those that trade directly using Internet).
2. When you see large price increase with huge spread between BUY and SELL, then most probably it is a wrong order.
3. Capitalizing on human mistake, sometimes you can consistently key in SELL order at price way above yesterday close, especially on low liquidity stock. If someone key in wrongly to BUY your offer, you gained the $ from their mistake.

CIMB Initiate Coverage on Petronas Chemical Group

CIMB Research initiated coverage on Petronas Chemical or PCHEM today with OUTPERFROM call with Target Price of RM7.25. At the close, PCHEM lost 10 sen to close at RM5.86.

My view:
PCHEM is a FBM KLCI stocks and for this counter to go down so much when CIMB initiate coverage on this stock is something rarely seen. However, to be fair the South East Asia market performed badly today with Jakarta Composite Index down 152.90 points to 3478.55 and Singapore Straits Times Index lost 32.08 points to 3229.27 points.

All these seems like foreign funds have started to take profit. Be careful and start to unload $ from now onwards...

TM: Limited upside from now onwards

FBM KLCI ended 3.84 points higher today to 1572.21 points, registering 5th day straight gains. On a weekly basis, FBM KLCI surged 53.3 points or 3.51% to 1572.21.

My view:
We have really reached the uncharted territory. Logically, one couldn't stop thinking about what stocks to take profit out of the share market for some shares. Out of the stocks that I am looking at, here's one stock in which I think is ripe for profit taking:

Telekom Malaysia
In my blog with title TM:Special Dividend Coming? dated 3-Dec-2010, I have mentioned of the possibility of TM distributing special dividend. From the share price increase, it seems likely that TM may do so soon. However, I would prefer to take profit first due to: i) Average analyst target price for TM is RM3.53, 20 sen below today close of RM3.73, ii) assume dividend of 20 sen annually, the share price increase have pushed the dividend yield to 5.4% from around 5.8% previously, iii) assume TM pay out all the proceeds from Axiata stake sale and Measat, the special dividend should less than 30 sen which is already reflected in the price increase.

CRESNDO: 5 reasons NOT TO MISS THIS STOCK

Stock Code: 6718
Potential can go up to RM2.12
Upside potential: 47.2%

I have written about Crescendo or CRESNDO on 10-Dec-2010, the full link: CRESNDO Introduction.

To recap, CRESNDO. To recap, CRESNDO is mainly involved in property development and construction related activities in Johor. CRESNDO is a pure proxy to Iskandar investment theme as the Company owns a total of 3,055 acres of land in Johor, out of which 1,735 acres of it is within the boundary of Iskandar Malaysia (as of 31-July-2010).

As usual, let's do some KISS (Keep It Short and Simple) and look at the 5 reasons not to miss this stock.


No 1. Stellar 3Q2011 result with net income up 107% y-o-y
On 29-Dec-2010, CRESNDO announced its 3Q2011 result in which net income surged 107% y-o-y to RM8.45m. However, the net income drop 7.3% q-o-q. Looking from 9-months year to date or 9MYTD perspective, net income surged 56% to RM22.38m


No 2. Consistently paid dividend of 7 sen in the past 5 years, this year dividend likely to be higher
Along with the result announcement, CRESNDO announced dividend of 2 sen per share. This is a surprise as the Company did not do so in last year. Looking at the trend in which 6 sen dividend already announced for this year, final dividend of 3 sen is likely, bringing total dividend to be 9 sen. This translates into 6.25% dividend yield based on yesterday close price of RM1.44... this is easily the highest dividend yield counter among the property stocks.


No 3. From technical point of view, price have returned to NEUTRAL level
After the good 3Q2011 result, the market has noticed CRESNDO and push the stocks to OVERBOUGHT level, causing CRESNDO to move up to as high as RM1.48 on 4-Jan-2011. With the share price retreated slightly to RM1.44 yesterday, the stock RSI has returned to 67.7, indicating it has returned to NEUTRAL level. How to play with this? Use this as a chance to accumulate this stock with deep value.


No 4. Attractive value with Price to NTA ratio of 0.48x
Considering that: i) CRESNDO has the potential of growth due to its exposure to Iskandar investment theme, ii) 3Q2011 net profit jumped 107% y-o-y and iii) consistenly paid dividend in the last 5 years with 7 sen dividend each year... the market may have given too much discount to CRESNDO with only 0.48x Price to NTA or P/NTA. 
 
No 5. Have potential to increase 47.2% to RM2.12
KSL is the nearest comparison for CRESNDO with P/NTA is 0.93x based on yesterday close price of RM1.94 and NTA of RM2.08. However, KSL has land or projects in KL while CRESNDO do not. By taking this into consideration, 25% discount to KSL's P/NTA will give fair P/NTA of 0.7x. If the market agree to 0.7x P/NTA for CRESNDO, then this stock is poised to go all the way to RM2.12, representing possible upside of 47.2%.

FPI: 5 reasons NOT TO MISS THIS STOCK (Stock code 9172)

I have written about Formosa Prosonics Industries or FPI on 18-Nov-2010, the full link: FPI Introduction.

To recap, FPI produces a variety of products which include Home Theatre Audio Systems, Satellite Speaker, High-End Audio Systems, AV Racks, WI-FI Internet Radio, WI-FI Internet Adaptor, Outdoor Speaker, Bluetooth Speaker, Receptor Radio, CD Radio & Car Speaker Series.


The Group’s manufacturing facilities are located in Port Klang (Selangor), Sungai Petani (Kedah) and Dongguan (Guangzhou, China). Overall, the Group owns 2,908,170 square feet in total of land area.

Let's do some KISS (Ooops, I mean Keep It Short and Simple) and look at the 5 reasons not to miss this stock.

No 1. Attractive value with historical PER of only 6.1x
Considering that: i) FPI has more than 20 years experience in manufacturing high end speaker, ii) net profit jumped 175% in FY2010 and iii) strong balance sheet with net cash of RM81.4m... the market may have given too much discount to FPI with only 6.1x historical PER. Even at 9x historical PER, FPI should worth at least RM1.33.
No 2. > 10% Dividend Yield (Historical)
In FY2009, FPI distributed total dividend of 10 sen. Based on closing price of 90 sen, this is 11.1% dividend yield. Bear in mind though that this is historical dividend. FPI announced 3 sen dividend in 2Q2009 but did not do so this year during 2Q2010. Nevertheless, FPI distributed 7 sen dividend in 4Q2009 and it is still possible the Company may pay 7 sen or 10 sen. Worst case, 5 sen still not bad as it translates into 5.6% yield.

No 3. Unusual volume increase today
Let's have a look at the previous 5 day volume (rounded to nearest 1000):
28-Dec-2010: 35000
29-Dec-2010: 60000
30-Dec-2010: 55000
3-Jan-2011:    20000
Today 4-Jan-2011, FPI total traded volume is 289000

Which is about 700% increase as compared to its normal average volume of 42.5k. This means that the stock is getting more attention from investors after being neglected for some time. Significant increase in volume in good fundamental stocks may be followed by share price surge.

No 4. Laggards among small cap counters
With market cap of around RM200m, FPI is a small cap counter which has yet to appreciate significantly. When the main market increase cool down, mid cap and small cap counter will normally come into investors attention. From the significant volume increase, FPI seems to be the next stock you should really look at...

No 5. Have potential to increase 47.8% to RM1.33
Wait, don't think I am too bullish here for FPI. Look at my previous post FPI Introduction and FPI 2Q2011 Result, look at the balance sheet, look at the Company's potential in high end speaker manufacturing. Giving a 9x historical PER is certainly not too demanding. If the market agree to 9x historical PER for FPI, then this stock is poised to go all the way to RM1.33.

MBMR: 5 reasons NOT TO MISS THIS STOCK

MBM Resources Berhad or MBMR owns 20% of PERODUA and 71.5% of Daihatsu (M) Sdn Bhd. Besides motor segment, the Company also involves in Manufacturing and Property segments as shown in the Group Structure below:

To make it simple, let's have a glance at top 5 reasons why you SHOULD NOT MISS THIS STOCK:

NO 1: Attractive Valuation
At RM3.34, the stock is trading at forward PER of 5.9x only, as compared to APM 9.3x and PROTON 9.8x


NO 2: Earnings improving, FY2010 earnings poised to be the highest ever in history
For 9 months 2010 or 9MYTD, MBMR accumulated net income is RM112.78m. Considering that Quarter 4 is normally weaker, let say MBMR made only RM25m in the last quarter. If that comes true, MBMR will be achieving its highest ever net income since incorporation. Imagine the share price reaction when the earnings are reported in newspaper and by other research house.


NO 3: Still significantly below book value of RM4.03

At RM3.34, the market is giving discount of 17.1% to the Company's Book Value. Think it again, 20% ownership of Perodua and 71.5% ownership of Daihatsu Malaysia. Does it make sense for the discount? I myself think that the discount should narrow to 5%, which means MBMR has potential to go up to RM3.83.


NO 4: From technical view, still NOT OVERBOUGHT

At RM3.34, the Relative Strength Indicator or RSI reading is 59.1, which means it is still at NEUTRAL state. Still some way to go before MBMR RSI cross 70 level, which then it will be considered Overbought.


NO 5: Average analyst target price is RM4.56
There are 11 analysts covering MBMR, 10 calling BUY, 1 HOLD. The average target price is RM4.56, representing upside of 36.5% from current market price of RM3.34.



Possible bonus issue?
MBMR balance sheet has the strength to do so. The market price has surpassed RM3.00 which may cause less retailers participation. All these indicators suggest that it is possible for MBMR to do bonus issue, 1 to 1 is not a major problem...