13 May 2012

Weekly Stock Picks Commentary Report (7-11 May 2012)

Malaysia Stock Picks
Week 19 (7-11 May) Stock Picks Commentary

Hi ! Welcome and thank you for your continuous support for Malaysia Stock Picks site. Here are the stock picks commentary for Week 19 (7 - 11 May).

In light of massive amount of queries and interests from readers regarding the upcoming IPOs including Felda Global Venture, I have decided to write a guide on How to spot a good IPO and a bad IPO in Malaysia.

Be sure to also read on a comprehensive guide on How to be a Successful Investor in Malaysia, especially if you are a beginner and are excited to venture into investing in the stock market.

The links will be embedded on the right sidebar for your convenience.

Stock Picks #1
Multi Purpose Holdings (MPHB)

Week high : RM 3.02 (Up 14 sen – 4.9%)

On 8 May, MPHB's finance executives (who are involved in the corporate plan) told TheEdge that Datuk Lim Tiong Chin is negotiating for a management buyout for MPHB's stockbroking firm AA Anthony which analysts estimates to worth around RM 170 million.

Their analysis showed that if the entire non-gaming assets are disposed under their asset rationalisation exercise, the proceeds is enough to repay their entire debts and borrowings to a net cash position of RM 805 million. This position gives them the ability to pay a special dividend of up to 56 sen per share.

Kenanga Research favours MPHB’s move to become a pure NFO play citing that this will trigger the market to re-assess MPHB’s valuation to be up to par with current favourite Berjaya Sports Toto Bhd’s valuation.

MPHB is currently traded 23% discount in terms of valuations against Berjaya Sports Toto.

Market reacted positively on MPHB’s ongoing asset rationalisation exercise where non-gaming assets are planned for disposal to enable MPHB fully focus on its Number Forecast gaming business and proceeds from sale of assets will enable MPHB to pare down its borrowings or to be repaid to its shareholders.

It currently has a 100% stake in Magnum, which is one of the largest Number Forecast Operator (NFO) in Malaysia.

MPHB stock rose 4.9% (14 sen) since 8 May to week’s highest RM 3.02 on the same day and closed at RM 2.91 at the end of this week.

Stock Picks #2
AEON Credit Berhad (AEONCR)

Two-Week high : RM 11.50 (Up 85 sen – 8.8%)

“To receap 2 weeks ago, On 23 April, AEON Credit reported that its net profit jumped 43% year-on-year and 10% quarter-on-quarter to RM27.7mil for 4th quarter ended Feb 20, 2012, mainly from credit card and personal financing. Hwang DBS Vickers Research revised AEON Credit's target price to RM 9.20 on the same day pegging to 8 times PE ratio.

Market took this news as positive on improving market sentiments for the financing business. Furthermore, on 24 April, market talk rumoured that AEON Credit may be mulling for a 1-for-1 bonus issue.

OSK Research indicated that a bonus issue would be a positive move to retail investors as liquidity is one of the concerns of AEON Credit. AEON Credit rose 61 sen (6.3%) since 24 April to the week’s highest RM 10.26 on 26 April and closed at RM 10.06 at the end of the week.”

AEON Credit stock continue to rally through Week 19 (7-11 May) gaining a total 8.8% or 85 sen since April 24 when market talk rumoured that AEON is mulling for a bonus issue to improve its stock liquidity.

OSK Research also indicated that a bonus issue would be a positive move to retail investors as liquidity is one of the concerns of AEON Credit

This definitely gave the market an energy boost just after AEON Credit reported a 43% jump in its year-on-year quarterly net profit announced on 23 April.

Market continue to favour AEON Credit’s improving sentiments in its credit card and personal financing business which saw AEON Credit stock gained a total 8.8% or 85 sen since April 24 to reach its two-week high of RM 11.50 on 11 May and closed at RM 11.20 for the week.

Stock Picks #3
Perisai Petroleum Teknologi (PERISAI)

Week high : 95.6 sen (Up 7.5 sen – 8.4%)

Market reacted positively as the additional US$ 208 million will help Perisai fill its order book until July 2014 which may also have a potential to boost earnings in the near future.

PERISAI stock rose 8.4% (7.5 sen) since 8 May to week’s highest 95.6 sen on 11 May and closed at 93.5 sen at the end of this week.

Stock Picks #4
Sunway Berhad (SUNWAY)

Week high : RM 2.46 (Up 16 sen – 7%)

Sunway Construction was awarded Package V4 for works between Section 17 in Petaling Jaya and the Semantan Portal, where the alignment will continue underground.

Market reacted positively as the MRT tender award would generate additional revenue to Sunway Berhad and this could potentially boost profits, even though the exact worth of the contract awarded to Sunway Berhad is not publicly known.

Before you decide to splurge on Sunway stocks, do take note that on 24 April, AmResearch reports that Sunway’s property division is feeling the impact of the 70% loan-to-value ruling introduced in November last year.

This is because Sunway’s pricing for its products has always been on the high side and 70% of its planned launches are priced at least RM1 million per unit. Consequently, AmResearch believes that it will be challenging for Sunway to meet its RM1.9 billion sales target this year on weaker sales since early 2012.

SUNWAY stock price surged 7% or 16 sen within the day on 9 May to a high of RM 2.46 and closed at RM 2.33 for the week.

Stock Picks #5
Tasek Corporation Berhad (TASEK)

Two-week high : RM 9.39 (Up 72 sen – 8.3%)

“To recap last week on 1 May, Tasek Corp’s CEO Thing Sii Tien @ Yao Sik Tien mentioned that he expects decline in cement demand from private sector jobs this year to be compensated by Government mega projects.

Some of the more prominent Government mega projects include the RM30 billion Mass Rapid Transit (MRT), Iskandar development region in Johor, the Northern Corridor Economic Region, and also the East Coast Economic Region.

Market reacted positively on potential earnings boost from Government mega project to Tasek Corp, the fourth largest cement company in Malaysia with a 10% market share. TASEK stock rose 3.6% (31 sen) since 1 May to week’s highest RM 8.98 on 4 May and closed at RM 8.90 at the end of the week (7 May 2012).”

Market continues to react positively this week on the potential earnings boost from Government mega project, mainly the MRT line project.

Even more so when on 9 May, the Mass Rapid Transit Corporation (MRT Corp) announced that it has awarded four additional packages to construct MRT line at Sg Buloh, Kota Damansara, Petaling Jaya, Seremban Portal, Bandar Tun Hussein Onn and Taman Mesra

The award of tenders indicates that works are soon to commence and this could have a positive impact on the demand for cement in the near future.

TASEK stock price continued surge upwards gaining a total 8.3% or 72 sen May 1 to this week’s highest RM 9.39 on 9 May and closed at RM 9.26 at the end of the week.

Technical Analysis Results:-

Can-One Berhad-  “To recap, last week On 30 April, analyst S.N. Lock performed Technical Analysis on Can-One Berhad stock price chart and indicated that Can-One Berhad is poised to move towards resistance zone of RM 2.25- RM 2.45 (upside of 3%-12%).

Contrary to the technical analysis, CANONE stock price had moved downwards plunging to a low of RM 2.07 or -5.5% on 3 May and closed at RM 2.10 for the week.”

Subsequently, this week, CANONE stock continues move in contrary to the technical analysis recording a total drop of 6.4% since 30 April to a two-week low of RM 2.05 on 10 May, . The stock closed at RM 2.05 to end the week.

Analyst S.N. Lock mentioned that Benalec’s daily price trend staged a technical breakout of its intermediate-term downtrend and its daily fast MACD (Moving Average Convergence Divergence indicator) continued to stay above its daily slow MACD at the market close on 4 May.

Its 14-day Relative Strength Index (RSI) stood at the 65.85 per cent level on 4 May. Its 14-week and 14-month RSI were at the 47.36 and 47.40 levels respectively.

BENALEC stock price surged 4.1% or 5 sen to a high of RM 1.28 on 7 May and closed at RM 1.18 for the week.

His analysis pointed that the 14-day relative strength index improved rapidly from a reading of 38 to settle at 77 points and a buy signal was confirmed when the daily moving average convergence/divergence histogram sustained the upward expansion against the daily signal line.

Impressively, MKH stock price movement concurred with analyst K.M. Lee’s prediction and surged 14.3% or 30 sen since 5 May to week high RM 2.40 on 8 May and closed at RM 2.32 for the week.

Commentary on other Stocks:

Consequently Wilmar stocks listed in the Singapore Stock Exchange dropped 9% to a three-year low on heavy volume.

Recall PPB announced on 30 Dec 2011 that it proposed to acquire 20% in each of Wilmar’s China-based oilseeds and grains companies namely, DongGuan Yihai Kerry Oils, Grains and Foodstuffs Industries Co. Ltd and Yihai (Zhoukou) Wheat Industries Co. Ltd.

The question really is whether this acquisition is still viable judging from the challenges faced by China’s oilseeds and grains business as highlighted in Wilmar’s financial statements.

Market reacted in negativity as they anticipate a lower share of profits from Wilmar in PPB’s next quarter’s results.

On the flip side, do take note that Wilmar's core palm and laurics business’s pre-tax profits had increased by 53% to $234.9 million. Margins had also improved significantly, benefiting from the revised Indonesian export duty structure which came into effect in mid-September 2011.

PPB stock price dropped 3% or 50 sen since 10 May to week low of RM 16.10 on 11 May and closed at RM 16.16 for the week.

Click Here to view all latest posts on PPB Group

According to the Minister of Domestic Trade, Consumerism and Cooperatives, the new 2012-2014 long-term contract price for raw sugar has been set at 26 US cents per pound, 49% higher than the previous 2009-2011 price of 17.5 US cents per pound.

Government has since raised sugar subsidies from 20 sen to 54 sen per kg to offset the impact on MSM’s earnings. However, it was not enough to fully offset the incremental increase in cost.

Market reacted negatively over concerns that the amount of costs hike that MSM has to absorb is still unclear. Even though sugar is a staple and demand is stable and sustainable, the selling price of sugar is highly regulated and is determined solely by the Government.

In light of the upcoming General Election, this simply means that passing on costs to consumers is nearly impossible (unless Government increases sugar ceiling price), so MSM could only rely on Government subsidies to maintain its margins and profitability.

MSM stock price dropped 4.7% or 25 sen since 9 May to week low of RM 5.06 on 10 May and closed at RM 5.20 for the week.


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