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Sunday, October 15, 2017

Topglov: Gangbuster Quarter!

Results Update

For QE31/8/2017, Topglov's net profit rose 27% q-o-q or 51% y-o-y to RM99 million while revenue rose 4% q-o-q or 25% y-o-y to RM902 million. Sales Volume (quantity sold) was exceptionally high with double-digit growth of 14.0% as compared to QE31/5/2017. This led to an all-round improvement on its profits. The improved performance was attributed to improvements in product quality and manufacturing efficiency, coupled with new capacity coming on-stream and strong demand growth.

 
Table: Topglov's last 8 quarterly results


Graph: Topglov's last 45 quarterly results

Valuation

Topglov (closed at RM6.01 last Friday) is now trading at a trailing PE of 22.6X (based on last 4 quarters' EPS of 26.55 sen). At this PER, Topglov is deemed fully valued.

Technical Outlook

Since it made a high of RM7.00 in December 2015, Topglov has not traded above the RM6.00. Last Thursday & Friday, it did just that. This may signal a re-test of the all-time high of RM7.00 in the next few months. 


Chart 1: Topglov's monthly chart as at Oct 13, 2017 (Source: Malaysiastock.biz)


Chart 2: Topglov's monthly chart as at Oct 13, 2017 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance and positive technical outlook, I think Topglov is poised to go higher. I hereby revise my rating from REDUCE to HOLD.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Friday, October 13, 2017

HoHup: An Easy Rally!


A few weeks back, I discussed with a client about the successful launch of Malton's The Park 2 Pavilion in Bukit Jalil. This is the project which Hohup is entitled to a 18% share of the gross development value. In addition, Hohup has an adjoining piece of land measuring 10 acres. Thus I rated Hohup as a cheap proxy to ride on growing demand for Bukit Jalil area. Unlike Malton which rose from RM0.90 to RM1.10, Hohup declined from RM0.80 to below RM0.70. Today Hohup announced that it will not go ahead with its Rights Issue to raise fund for its construction & property development business. Under normal circumstances, that would be a bad news. In the present market, it is not. Hohup rose from RM0.67 to RM0.71 as at 4.10pm.

Looking at  the charts below, Hohup can be a good stock to consider for a recovery play. It is trading at the long-term uptrend line, with support just below RM0.70 (see Chart 2). If it can recruit enough buying support, it may even put in a short rally to test the upper line of the downward channel at RM0.85 (see Chart 1).


Chart 1: Hohup's daily chart as at Oct 13, 2017_4.00pm (Source: Malaysiastock.biz)


Chart 2: Hohup's weekly chart as at Oct 13, 2017_4.00pm (Source: Malaysiastock.biz)

Thursday, October 12, 2017

Topglov & Harta: Upside Breakout

Topglov and Harta have both broken above their downtrend line. In both cases, the upside breakout was followed by strong rally on substantial volume. For Topglov, the breakout level was at RM5.70 and, for Harta, it was at RM7.00. Since Kossan and Supermx have not witnessed similar upside move, I suspect there is a joint development involving Topglov and Harta. Could it be a merger of these companies? Only time will tell...


Chart 1: Harta's daily chart as at Oct 12, 2017_4.00 (Source: Malaysaistock.biz)


Chart 1: Topglov's daily chart as at Oct 12, 2017_4.00 (Source: Malaysaistock.biz)

Based on the bullish breakout, Topglov and Harta are possible trading BUY. Good luck.

Market Outlook as at October 12, 2017


Our market is at a critical juncture. If it breaks below 1750, it could well be the end of the rally that began in January this year. Lower support levels at 1725 & 1700 are mere stops for a market in search of a bottom. What could possibly cause the rally in our market to end? Politics!


Chart 1: FBMKLCI's daily chart as at Oct 12, 2017_12.30 (Source: malaysiastock.biz)


Chart 2: FBMKLCI's weekly chart as at Oct 12, 2017_12.30 (Source: malaysiastock.biz)

Our rally has always been billed as an election rally. While the election has yet to be called, the ugliness of our politics has shaken the confidence of investors. In the past few days we saw incredulous reports of a huge corruption case in Sabah involving an opponent of the ruling party. How could RM1.5 billion of budget allocation be stolen? Of course, we know bigger sums went missing in a certain company but that's a company controlled by a few crooks. If corruption has reached a point where RM1.5 billion could be carted away from our government ministries, the end is near for Malaysia.

Next, we read about a personal attack on the Sultan of Johor who had earlier spoken out against certain extreme religious practices. What's surprising was the disquiet and inaction on the part of the authority to investigate the case. This has led to much unhappiness in Johor and possibly to the current round of wild talk about secession from the Federation.

Now is a good time to put a swift end to no-holds-barred politicking which we have seen in the past few years. The responsibility rests on our Prime Minister to do the needful and not merely keeping an elegant silence. He must decide what is more important; his political career or the fate of the nation. If he choose to put his survival ahead of the nation, he will not be judged kindly by future generations.

Wednesday, October 11, 2017

Sunway-WB: Such High Premium? (UPDATED)

If you have been in the market long enough (or, too long for some of us), you may remember one peculiar factoid about company-issued warrants of large construction-based stocks, such as Gamuda and IJM: They tend to have very low premium. My understanding is that these companies consistently issued warrants as sweeteners for their bond issuance and, as result, after the initial euphoria, the warrant premium will drop back to as low as 1-3%. Today, Gamuda has one warrant outstanding- Gamuda-WE- which is trading at a premium of 1.5%. Currently, IJM has no more warrant outstanding. Its last one, IJM-WC had expired in Oct 2014.

Now, the last 2 days we've witnessed the euphoric rise in Sunway-WB. This warrant has an exercise price of RM1.86 and expiring only in Oct 2024. Based on its current price of RM0.70 and share price of RM1.82, Sunway-WB is trading at a premium of 40.4%.

If my observation of past premium for construction groups holds true, the current price of Sunway-WB can only sustain if Sunway share price were to rally strongly & quickly. Otherwise the price of Sunway-WB will likely come down. If you have this warrant, it is advisable to take some profit soon.


Chart 1: Sunway-WB's intra-day chart as at Oct 11, 2017_10.45 (Source: Shareinvestor.com)


Chart 2: Sunway's daily chart as at Oct 11, 2017_10.45 (Source: Shareinvestor.com)

Thanks to a reader's comment, I like to update my post to amend an error in the exercise price.

The exercise price of RM1.86 per Warrant will be effective for a period of one year from the date of issuance of the Warrants. Subsequently, the exercise price is subject to a fixed annual step-down of RM0.07 on each of the anniversary dates from the date of first issuance of the Warrants.

This means that the exercise will drop progressively as follows:
  • RM1.86 on and after Oct 4, 2017
  • RM1.79 on and after Oct 4, 2018
  • RM1.72 on and after Oct 4, 2019
  • RM1.65 on and after Oct 4, 2020
  • RM1.58 on and after Oct 4, 2021
  • RM1.51 on and after Oct 4, 2022
  • RM1.44 on and after Oct 4, 2023


How do you determine the premium? To be frank, I am not sure. If we used the average exercise price of RM1.65 - the mid point from the above schedule – then, the premium is about 29% now (based Sunway-WB at 0.675 & Sunway at RM1.80). It still looks expensive.

Monday, October 09, 2017

SKPRES: Next Upleg Beckons?

Result Update

In QE30/6/2017, SKPRES's net profit rose marginally by 1% q-o-q or 83% y-o-y to RM33 million while revenue was mixed, down 11% q-o-q but up 64% y-o-y to RM525 million. Revenue dropped q-o-q mainly due to lower sales recorded in June 2017 as a result of Hari Raya festive holidays. Despite the sharp drop in revenue, PBT dropped only marginally by 1.4% as a result of improved margin due to operational efficiency. (Note: SKPRES's result was announced on August 25.)


Table: SKPRES's last 8 quarterly results


Graph: SKPRES's last 37 quarterly results

Financial Position

As at 30/6/2017, SKPRES's financial position is deemed fairly satisfactory with good current ratio at 1.76x but slightly elevated gearing ratio at 0.92x. (Note: SKPRES's gearing ratio is no worse off when compared to VS's gearing ratio of 1.27x as at 31/7/2017. These EMS groups are doing a roaring business which is very taxing on its capital.)

Valuation

SKPRES (closed at RM1.58 yesterday) is now trading at a PER of 15 times (based on last 4 quarters' EPS of 10.01 sen). Its PEG ratio is 0.4x (based on last 2 years' earning CAGR of 35%). As such, SKPRES is deemed fairly attractive for a growth stock.

Technical Outlook

SKPRES is now testing its recent high of RM1.58. If it can break above level, SKPRES can commence on its next upleg.


Chart 1: SKPRES's weekly chart as at Oct 6, 2017 (Source: ShareInvestor.com)


Chart 2: SKPRES's monthly chart as at Oct 6, 2017 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance, attractive valuation for a growth stock & potentially bullish technical outlook, SKPRES could be a good stock to consider for investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

3A: Testing Its Uptrend Line

Result Update

For QE30/6/2017, 3A's net profit dropped 11% q-o-q but rose marginally by 0.4% y-o-y to RM9.2 million while revenue dropped 0.8% q-o-q but rose by 5.6% y-o-y to RM102 million. Revenue dropped q-o-q due to lower sales. PBT dropped q-o-q due to forex loss this quarter and lower profit margins. (Note: The last quarterly result was announced on August 17, 2017.)


Table: 3A's last 8 quarters' P&L


Graph: 3A's last 16 quarters' P&L

Financial Position

As at 30/6/2017, 3A's financial position is deemed satisfactory with current ratio at 3.76x and gearing ratio at 0.24x.

Valuation

3A (closed at RM1.11 last Friday) is now trading at a PER of 13x (based on last 4 quarters' EPS of 8.66 sen). Its PEG ratio is 0.3x (based on last 3 years' earning CAGR of 45%). As such, 3A is deemed fairly attractive for a growth stock.

Technical Outlook

Over the past 2 years, 3A has risen gradual from RM0.70 in September 2015 to a high of RM1.45 in June 2016. The current correction has brought the share price down to the uptrend line. The support from the uptrend line is at RM1.10.


Chart: 3A's daily chart as at Oct 6, 2017 (Source: Malaysiastock.biz)

Conclusion

Based on good financial performance & financial position, attractive valuation and mildly bullish technical outlook, 3A remains a very good stock to consider for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Wednesday, October 04, 2017

SOP: An Attractive Plantation Stock

Background

Sarawak Oil Palms Bhd ("SOP") is involved in the cultivation of oil palms and the operation of palm oil mills. Its business divisions include Plantation, Milling, Downstream, Marketing & Trading and Property Development.

In December 2016, it completed the acquisition of Shin Yang Oil Palm (Sarawak) Sdn Bhd (SYOP) from a related party, Shin Yang Holdings Sdn Bhd (SYHSB) for an enterprise value of RM873 million. This raised its total land bank by 65% to 119,653ha, with planted area increasing by 37% to 87,744ha.


SOP's Planted Hectarage as at December 2016 (from Annual Report for FY2016)

Historical Financial Performance

SOP's revenue has been on a steady uptrend since 2009. Profits, which peaked in FY2011, began to recover in FY2016 mainly due to the favorable palm products average realized prices which more than offset the drop of the Group's FFB production by 11% (as a result of the El-Nino phenomenon). The profits for FY2017 is projected to increase as the 1H2017 has already showed better results due to higher FFB production volume and higher average palm products realized price improvement and a fair value gain on derivative financial instruments of RM27 million.


Graph 1: SOP's last 19 years' P&L

Recent Financial Results

In QE30/6/2017, SOP's net profit dropped 2% q-o-q but rose 100% y-o-y to RM67 million while revenue rose 9% q-o-q or 28% y-o-y to RM1.22 billion.


Table 1: SOP's last 8 quarters' P&L


Graph 2: SOP's last 12 quarters' P&L

Latest Financial Position

As at 30/6/2017, SOP's financial position is deemed healthy with current ratio at 1.65x and gearing ratio at 0.96x.

Valuation

SOP (closed at RM4.17 yesterday) is now trading at a trailing PER of 10.5x (based on last 4 quarters' EPS of 39.6 sen). This compared favorably to other larger plantation groups, like KLK (with PER of 22x) or UTDPLT (with PER of 17x) or GENP (with PER of 18x).

Technical Outlook

SOP has broken above its downtrend line at RM3.60 in August. On October 2, it broke above the "horizontal line" at RM4.00 - albeit on thin volume. Yesterday it continued to rise - still on relatively thin volume. Its immediate resistance is at the horizontal line at RM4.45.


Chart 1: SOP's weekly chart as at Oct 3, 2017 (Source: MalaysiaStock.biz)

SOP is in a long-term uptrend line with support at RM3.50.


Chart 2: SOP's monthly chart as at Oct 3, 2017 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance & position, attractive valuation & positive technical outlook, SOP could be a good stock for long-term investment.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

Tuesday, October 03, 2017

Crude Oil: Just a Pullback

In the past few days, we saw fairly deep correction among O&G stocks. That reflects the sharp correction in crude oil prices. However the correction is not out of order. I expect Brent to drop back to its uptrend line, SS with support at USD 54-55. 


Chart 1: Brent's daily chart as at Oct 2, 2017 (Source: Stockchart.com)

If Brent can stay above the uptrend line - or consolidate around USD54-55 but violating the uptrend line - then the prospect of it breaking above the oval-shape continuation pattern is  still there. When that happens, it may launch into its next upleg.


Chart 2: Brent's daily chart as at Oct 2, 2017 (Source: Stockchart.com)

If you want to get into the O&G sector, you can do so slowly once it is fairly clear that the USD54-55 price level for Brent can hold. Good luck!