Weekly Stock Picks Commentary Report (21-25 May 2012)

Malaysia Stock Picks

Week 21 (21-25 May) Stock Picks Commentary

Hi! Welcome to Malaysia Stock Picks site. We have officially clocked in more than 10,000 page visits since the blog’s inception slightly more than a month ago. Thank you for your continuous support.

We have the Weekly Stock Picks Commentary archive section if you would like to view our previous commentary

Here is the stock picks commentary for Week 21 (21-25 May).

Stock Pick #1

Multi Purpose Holdings (MPHB)

Week high : RM 3.27 (Up 39 sen – 11.9%)

To recap last week- “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.

On 9 May, Kenanga Research initiated coverage on MPHB and estimated its non-gaming assets to worth RM 1.44 billion (equivalent to RM 1.77 per share).

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.”

Subsequently this week, Multi-Purpose Holdings (MPHB) announced a proposal to list its non-gaming business on Bursa Malaysia stock exchange. Managing director Datuk Surin Upatkoon said that the demerger will allow MPHB to position itself as a "gaming-dividend" stock with a sustainable dividend payment policy of at least 80 per cent of its profit annually.

Market took this news as positive as the listing of MPHB non-gaming assets may potentially realise the value of its assets.

Take note that even though Kenanga Research estimated its non-gaming assets to worth RM 1.44 billion, the exact valuation of the assets and how much each shareholder will get from the deal are not finalised and known yet and the demerger is subject to shareholders approval.

MPHB stock price had a total surge of 11.9% from 8 May to three week high of RM 3.27 on 25 May and closed at RM 3.19 for the week.

Click Here for all latest posts on MPHB

Stock Picks #2

AirAsia Berhad (AIRASIA)

Week high : RM 3.60 (Up 21 sen – 6.2%)

On 24 May, TheStar reported that Thai AirAsia will go for an initial public offering (IPO) exercise to list on the Thailand Stock Exchange. The listing is expected to complete by end of May.

AirAsia currently owns a 49% stake in Thai Airasia and its stake will reduce to 45% after the IPO. The IPO will raise RM 450 million, offering 1.2 billion shares valued at 3.7 baht (37 sen) a share, out of which 462.5 million shares are from existing shareholders.

Market is positive on this because if the listing goes through, AirAsia has the opportunity to cash out part of its stake in Thai AirAsia. The additional funds raised in the IPO for Thai AirAsia itself is encouraging.

AIRASIA stock price rose 6.2% since 24 May to week high of RM 3.60 on 25 May and closed at RM 3.60 for the week.

Click Here for all latest posts on AirAsia

Stock Picks #3

JT International Berhad (JTINTER)

Week high : RM 7.34 (Up 52 sen – 7.6%)

On 24 May, JT International announced a special dividend totaling 62 sen (24 sen per share less 25 per cent tax and 38 sen per share, tax exempt)

Market took this news as positive on anticipation of the windfall cash payout to JT International shareholders. The ability to payout cash dividends goes a long way in demonstrating robust cash flow management of JT International.

JTINTER stock price surged 7.6% since 24 May to week high RM 7.34 on 25 May and closed at RM 7.27 for the week.

Click Here for all latest posts on JT International

On Other stocks:

JCY International-

“To recap, on last week commentary, we wrote that On 17 May, JCY International quarterly earnings surged 1,209% to RM 163 million on better HDD component selling prices and higher sales volume due to shortages in supply from Thailand floods

Take note that even though JCY net profit recovered strongly compared to previous year, current quarter’s net profit (RM 163 million) is rather flattish if compared with its preceding Q4 2011’s net profit (RM 162 million).

Surge in net profit from Thailand floods had started since Q4 of 2011. Market talk has it that the benefit from this event could have peaked and whether or not such robust results can be sustained and replicated for the next quarters ahead is questionable.

JCY stock price dropped 2.6% since 17 May to a week low of RM 1.47 on 18 May. Nonetheless, JCY stock price had surged by 268% since Oct 2011 when Thailand’s flood took effect from around 40 sen in Oct 2011 to RM 1.47 closing on 18 May.”

Click here to read Week 20’s stock picks commentary report

Subsequently, this week on 21 May, CIMB reports that JCY's competitors revealed that their capacity in Thailand will be back in full swing by the end of the third or fourth quarter 2012.

Market took this news negatively as they earlier questioned whether the benefit from the Thailand flood event could have peaked and whether or not such robust results can be sustained and replicated for the next quarters.

As a result, JCY stock price dropped further this week to a total drop of 18% since they announced their quarter results on 17 May to RM 1.33 closing and week low on 25 May.

Weekly Stock Picks Commentary Report (14-18 May 2012)

Malaysia Stock Picks

Week 20 (14-18 May) Stock Picks Commentary

Hi! Welcome to Malaysia Stock Picks site. Here is the stock picks commentary for Week 20 (14-18 May)

This week hasn’t been the most interesting one for many who has existing position in stocks. Companies took turns to unveil their poor quarterly performance, mediocre at best.

With Crude Palm Oil (CPO) futures falling a record 5.5% this week on the Malaysia Derivatives Exchange have prompted investors in Malaysia to pay attention to concerns over global financial uncertainty and slowing economies. Even WTI crude oil has been falling to below US$ 100 a barrel all for the same reasons.

From the feedbacks I received what’s keeping our readers awake at night is the ringing question on whether valuations of the stocks they are holding are still justifiable.

Could the fall in stock prices this week only be a temporary decline while market takes a short breather before continuing its raging bull run? Or is it just the tip of the iceberg to what could be worse in the coming weeks? Either way, understanding the fundamental changes that have affected the stock prices is a good idea.

China Economy Updates

On 16 May China announced that their foreign direct investment (FDI) inflows dropped 2.4% to US$ 37.9 Billion for the first four months of 2012 versus last year.

Even though FDI is an important factor to gauge foreign investor’s confidence toward the Country’s potential growth, but it is only a small contributing factor to overall capital inflow compared to exports which is worth about US$ 1.9 trillion in 2011.

On 14 May, China's Central Bank declares a cut on its bank reserves requirement ratio by 0.5% to 20% to stimulate lending amid heightened risk of economy slowdown.

Bank reserves requirement acts as a buffer to protect the banks from the impact of potential default in loans, so reducing its requirement may mean China banks are now less cushioned against risks of loan defaults.

What could have triggered the regulators to implement such a risky policy change? Could it be a slow down in consumption or rising demand for loans that the banks couldn’t keep up with? Or are the banks not collecting timely enough from its existing borrowers to finance new loans?

Back in Malaysia, I have had a few phone calls from different banks all within this week asking if I could consider a personal loan from them. Could this be a sign that bank’s lending activities slowing down and too much money liquidity is floating idle in the money market?

Or could this be the consequences of Bank Negara’s more stringent lending policy implemented since 1 Jan 2012?

Automotive Sector and the new lending guidelines

On 14 May, an interview by TheStar with Perodua’s Managing Director Datuk Aminar Rashid Salleh revealed that MBM Resources's 20% owned Perodua saw a dip in car loan approval rate since new lending rules.

Datuk Aminar assured investors that the demand for Perodua cars remained robust as indicated by the steady list of bookings of 18,000 to 20,000.

However, the approval rate for people wanting to buy a Perodua car has dropped.because of the more stringent new lending rules that requires loans to be assessed based on disposable income rather than gross income.

Market has reacted negatively because a drop in sales volume may potentially reduce net profits. Furthermore, a majority of sales by Perodua is done through bank loans.

MBM Resources stock price fell 12.2% or 65 sen since 14 May to week low of RM 4.68 which is also the closing price for the week. MBM Resources' rights shares with free detachable warrants has an issue price of RM 1.42 and will begin trading on 24 May.

Similarly, DRB-Hicom, the now owner of Proton suffered the same negative market perception and its stock price gains since since 27 April were erased. To recap, DRB Hicom on 27 April announced that it has received acceptances totaling 98.6% of the total issued and paid up share capital of Proton Holdings Bhd and will proceed to “compulsorily acquire” all outstanding shares. DRB Hicom stock price ended RM 2.36 for the week.

Expansion Plans

For the past few weeks, we hear many companies from all sectors announcing big expansion plans, such as Dijaya Corp’s RM 959 million purchase of properties and IOI Corp’s RM 995.5 million acquisition of 6 acres of land in Singapore to build high end condominiums. But will they still proceed and go ahead to realise them in light of a sluggish commodities market? Or will they re-visit and re-evaluate whether those expansion plans are still viable?

Interesting to know that on 17 May, World’s largest miner BHP Billiton announced that they had scrapped their US$ 80 Billion 5-year expansion plans as they expect a further cool down in commodity prices.

From the poll survey that you have participated for the week showed readers have mostly been interested in Plantation sectors, which could have been because of the upcoming IPO on Felda Global Ventures which would be the second largest planter in the World.

Palm Oil Sector and the falling Crude Palm Oil Prices

Bloomberg reported that Crude Palm oil futures fell 5.5% this week with August delivery contract closed at RM 3,096 a tonne for the week on the Malaysia Derivatives Exchange due to concerns that investors will hold back purchases in view of the uncertainty and slowing economies.

Throughout the week, major palm oil companies stock prices suffered the most losses stemmed from poor quarterly earnings results. On 25 April, TH Plantations reported decline of 40% in net profit to RM 13 million affected by higher production costs.

THPLANT stock price dropped 21% since 25 April to week low of RM 2.22 on 10 May and closed at RM 2.34 for the week.

On 15 May, United Plantations announced its Q1 2012 net profit fell 15.6% on higher wages and lower selling prices of CPO. In its quarterly announcement, it also stated that it anticipates CPO prices to weaken in second half of 2012 due to recovery in the biological yield cycle coupled with more favourable weather conditions

UTDPLT stock price dropped 5.2% since 15 May to week low of RM 23.70 on 18 May and closed at RM 24.20 for the week

On 16 May, Tradewinds Plantations announced quarterly earnings fell 91% to RM 4.34 million due to lower sales at unfavourable palm products prices, revenue rose 164% to RM 608.45 million due to contribution from Mardec Bhd

TWSPLNT stock price dropped 16.8% since 16 May to week low of RM 4.74 on 18 May and closed at RM 5.01 for the week.

Even for Kuala Lumpur-Kepong (KLK), which has not announced their quarterly results yet, suffered stock price decline of 9% to week low of RM 21.50 and closed at RM 22.10 for the week. Market anticipated KLK to suffer the same fate as its peers. KLK is scheduled to announce their results next week on 24 May.

Can we actually tell when CPO prices are heading downwards before they actually do?

Following frequently asked in our discussion section on whether the analysts or we retail investors could have predicted the falling CPO prices, I have written an article on how to tell when crude palm oil (CPO) prices are going to drop.

The current scenario has made it pretty clear that all factors should have triggered an alarm back in February this year, some time ahead before the start of a sliding trend which begins late March.

Food Sector

Three-A resources had on 23 April announced hydrolyzed vegetable protein plant in China will commence operations this month and is expected to account for 5% earnings in 2012 and 23% in 2013.

To recap, in late 2009, Wilmar International Ltd took up a 15.65% stake in Three-A. The plant is located near Wilmar's existing plant including Qinhuangdao Goldensea Foodstuff Industries Co Ltd, China’s largest soya protein producer.

3A stock price rose 14% (12 sen) on week 17 to its high of RM 1.35 on 25 April where market took this news positively as the additional capacity and opportunity to leverage on Wilmar's established sales and distribution network in China are both beneficial to Three-A's financial performance from 2012 onwards.

Subsequently, on 10 May, Wilmar International posted 34% drop in quarter earnings due to losses at its China-based oilseeds and grains business.

Market took this news as negative for 3A because profitability of its new hydrolyzed vegetable protein plant in China is dubious following the losses suffered by Wilmar. As a result, 3A stock price cancelled all gains from its stock price surge since 23 April to close at RM 1.12 for the week

On another note, PPB Group stock price continued to decline to a total drop of 8% to a two-week low of RM 15.20 since 10 May when its 18.3% owned Wilmar International posted 34% drop in quarter earnings due to losses at its China-based oilseeds and grains business.

Although PPB Group hasn’t announce their quarter results yet, market is still negative in anticipation of a lower share of profits from Wilmar in PPB’s next quarter’s results as well as questioning chances that PPB will suffer the same fate as other plantation stocks in light of the falling crude palm oil prices.

On 17 May, Malayan Flour mills reported its first quarterly loss of RM 598,000 as compared to a net profit of RM 29.8 million a year ago due to lower selling prices and lower sales volume due to stiff competition in its flour and grains segment.

Market reacted negatively as they became cautious on whether Malayan Flour is able to turnaround and improve its profitability in light of stiff competition in the flour and grains segments.

Malayan Flour’s bonus issue and warrants from a rights issue were listed on the stock exchange on 14 May, when it closed at RM 1.70.

MFLOUR stock price plunged 16.5% since 14 May to week low of RM 1.42 on 18 May and closed at RM 1.43 for the week.

Semiconductor Sector

HDD component manufacturers continue to report phenomenal growth in their quarterly net profit banking on severe shortage in global supply due to the Thailand flood which happened late last year.

On 18 May, Notion Vtec announced that its quarterly earnings rose 43.5% to RM 15.53 million compared to a year ago on strong orders for HDD and camera segments from affected clients due to the severe flooding in Thailand last year.

Notion Vtec’s turnover increased 56.7% to RM84.51mil from RM53.93mil

On 17 May, JCY International quarterly earnings surged 1,209% to RM 163 million on better HDD component selling prices and higher sales volume due to shortages in supply from Thailand floods

Take note that even though JCY net profit recovered strongly compared to previous year, current quarter’s net profit (RM 163 million) is rather flattish if compared with its preceding Q4 2011’s net profit (RM 162 million).

Surge in net profit from Thailand floods had started since Q4 of 2011. Market talk has it that the benefit from this event could have peaked and whether or not such robust results can be sustained and replicated for the next quarters ahead is questionable.

JCY stock price dropped 2.6% since 17 May to a week low of RM 1.47 on 18 May. Nonetheless, JCY stock price had surged by 268% since Oct 2011 when Thailand’s flood took effect from around 40 sen in Oct 2011 to RM 1.47 closing on 18 May.

Oil and Gas Sector

The SapuraKecana is a merged entity between SapuraCrest and Kencana. SapuraKencana has been a local hype since the company has a market capitalisation of RM 11.2 billion and a free float of 44%. Analysts and research houses favoured the enlarged entity as they have capabilities across the oil and gas value chain.

Even though SapuraKencana has been recently awarded a RM 460 million contract from Murphy Oil Sarawak and getting positive views from analysts such as Kenanga Research, SKPETRO stock price plunged a total of 13.8% to week low of RM 1.91 on its second day of listing on 18 May due to weak sentiment in the oil and gas sector. However, Affin IB Research believes Malaysia's Oil and Gas industry is still in a capex upcycle and SapuraKencana is the best proxy to ride the capex upcycle.

Market talk has it that SEPETRO stock price is due for a technical rebound after suffering two days of heavy losses. The global crude oil prices have yet to recover and when it does, then chances of SEPETRO getting an upward rebound is better.

Gas Malaysia IPO

On 14 May, MMC Corp obtained approval from Securities Commission to register Gas Malaysia’s IPO prospectus paving the way for a listing on 11 June.

A total of 333.84 million shares offered for sale will be from existing shareholders and the price is fixed at RM 2.20.

During an interview with Gas Malaysia’s Managing Director Datuk Muhamad Noor Hamid by TheStar, it was highlighted that revenue and sale volume this year will be robust as Gas Malaysia had on Feb 2012 signed a 10-year gas supply agreement with Petronas for a 29% increase in supply at 492 million standard cubic per day (mmscfd), from its previous supply of 382 mmscfd per day.

Do take note that Gas Malaysia's 2011 yearly net profit dropped 23% to RM229mil from RM298mil recorded in the previous year due to the new gas tariff implemented since 1 June 2011. Consistently, net margins fell from 26.3% to 12.5%.

The new gas tariff has only taken effect since June 2011, so the question really is whether the impact could be more severe this year with a whole-year effect? Or could the 29% increase in sales volume make up the lost in margins in absolute terms?

Click here for all latest updates on Gas Malaysia IPO

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.

On 9 May, Kenanga Research initiated coverage on MPHB and estimated its non-gaming assets to worth RM 1.44 billion (equivalent to RM 1.77 per share).

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.

Click Here for all latest posts on MPHB

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.”

Click here for pervious post Week 17 (23-27 April) Stock Picks commentary on Aeon Credit

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.

Click Here for all latest posts on AEON Credit

Stock Picks #3

Perisai Petroleum Teknologi (PERISAI)

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

On 8 May, Perisai Petroleum announced that they have secured a US$ 208 million contract from Sembcorp Marine to build drilling rigs, to be completed by July 2014

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.

Click Here for all latest posts on Perisai Petroleum

Stock Picks #4

Sunway Berhad (SUNWAY)

Week high : RM 2.46 (Up 16 sen – 7%)

On 9 May, the Mass Rapid Transit Corporation (MRT Corp) awarded four more packages for the construction of the Sg Buloh - Kajang (SBK) MRT Line worth RM3.22bil.

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.

Click Here for all latest posts on Sunway Berhad

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).”

Click here for last week's commentary on Tasek Coporation

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.

Click Here for all latest posts on Tasek Corporation

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.

Click here for all latest posts on Technical Analysis

Benalec Holdings Berhad- On 7 May, Analyst S.N. Lock says that Benalec stock price trend is poised to move towards RM1.30-RM1.47 intermediate-term resistance zone.

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.

Click here for all latest posts on Technical Analysis

MKH Berhad- On 5 May, Analyst K.M. Lee says that a positive breakout is imminent for MKH stock price may advance in the short term to challenge RM 2.50 - RM 2.60 upper resistance band.

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.

Click here for all latest posts on Technical Analysis

Commentary on other Stocks:

PPB Group Berhad – On 10 May, PPB Group's 18.3% owned Wilmar International posted 34% drop in quarter earnings due to losses at its China-based oilseeds and grains business.

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.

Click here to read more on the proposed acquisition

Subsequently, on 8 May, PPB Group announced to Bursa Malaysia that PRC regulatory authorities have issued the Certificate of Approval for Establishment of Enterprises with Foreign Investment in the PRC and the Business Licences for both the companies.

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

MSM Malaysia Holdings Berhad – On 9 May, MSM Malaysia Holdings announced its quarter core net profit declined 24.8% on higher raw material prices.

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.

Although no official announcement has been made, Affin Research believes that MSM is already taking delivery of raw sugar under the new long-term contract price

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.

Click Here to view all latest posts on MSM Malaysia Holdings

Weekly Malaysia Stock Picks Commentaries

2012

Week 20 14-18 May - China Economy, Auto, Palm Oil, Food, Semiconductor, O&G, IPO
Week 19 7-11 May - MPHB, Aeon Credit, Perisai, Sunway, Tasek

Week 18 30-4 May  - AirAsia, OSK, MAS, Tasek Corp, TopGlove

Week 17 23-27 April - Three A, DRB-Hicom, Panasonic, AEON Credit, TopGlove

Weekly Stock Picks Commentary Report (30 April-4 May 2012)

Malaysia Stock Picks

Week 18 (30 April-4 May) Stock Picks Commentary

Hi ! Welcome and thank you for being loyal reader of Malaysia Stock Picks site. Here are the stock picks commentary for Week 18 (30 April - 4 May).

If you would like to refer to earlier posts that are related to the subject, click on the links that are embedded into the sentences.

Stock Picks #1

AirAsia Berhad (AIRASIA)

Week high : RM 3.76 (Up 43sen - 13%)

On 2 May, Khazanah Nasional Bhd and Tune Air, the major shareholders of Malaysian Airline System Bhd (MAS) and AirAsia Bhd respectively announced that they had agreed to terminate their share swap agreement.

The reason? – On 3 May, an excerpt from an interview with Air Asia CEO Tony Fernandes by TheStar indicated that he has given up his attempt to turnaround MAS due to a few negative detractors with selfish attitude who made the most noise in MAS. He and Datuk Kamarudin Meranun have subsequently resigned as directors from MAS board

It is worthy to note that AirAsia stock price had fallen 6% since the share swap deal was agreed in August last year indicating negative market reaction towards the share swap deal.

Therefore, the market reacted positively when the share swap deal was announced terminated on 2 May. OSK Research mentioned on 3 May that investors will be pleased by the fact that Tony Fernandes could now fully focus on being group CEO of AirAsia.

AIRASIA stock rose 13% (43 sen) since 2 May to week’s highest RM 3.76 on 3 May and closed at RM 3.64 at the end of this week.

Click Here for all latest posts on AirAsia Berhad

Stock Picks #2

OSK Holdings Berhad (OSK)

Week high : RM 1.74 (Up 18 sen – 11.5%)

On 27 April, OSK Holdings announced that it has obtained Ministry of Finance’s approval for the proposed merger with RHB Capital.

Earlier on the same day, OSK CEO has U Chen Hock indicated that OSK has yet to receive go-ahead from Bank Negara and may take up to 4 to 6 months to finalise the deal once approval is obtained.

Market reacted positively as the merger is seen to potentially be beneficial to OSK shareholders even though the pricing valuations and way of settlement (cash or shares) are not yet determined and agreed by both parties.

This merger is attractive and important to RHB as it would place them as the country’s largest stockbroking firm with nearly 15% market share if the merger goes through.

Do take note that on 24 June 2011, negotiations on potential merger exercise between RHB and Maybank and CIMB was called off due to wide gap in price expectations. Maybank and CIMB were not willing to pay 2.25 times book value of RHB Cap.

OSK stock rose 11.5% (18 sen) since 27 April to week’s highest RM 1.74 on 2 May and closed at RM 1.69 at the end of this week.

Click Here for all latest posts on OSK Holdings

Stock Picks #3

Malaysian Airline System Berhad (MAS)

Week high : RM 1.34 (Up 12 sen – 9.8%)

On 2 May, Khazanah Nasional Bhd and Tune Air, the major shareholders of Malaysian Airline System Bhd (MAS) and AirAsia Bhd respectively announced that they had agreed to terminate their share swap agreement.

Instead, MAS and AirAsia has entered into a memorandum of understanding on possible set up of a Joint Venture to provide aircraft component maintenance support and repair services, improve value for money and to increase competitiveness and benefits to customers through procurement synergies

The Reason?

MAS’s reason for the termination was due to intense pressure from its 15,000 member employees’ union that opposed the share swap deal citing concerns over potential job losses following the tie-up. The union also said that the tie-up would benefit AirAsia more than MAS.

It is also noteworthy to know that MAS stock price has dropped 29 percent as of April 30 since the share swap deal was agreed in August last year indicating negative market reaction towards the share swap deal.

An interview with AirAsia CEO Tony Fernandes on 5 May saw him defending allegations of him benefiting AirAsia during his stint at MAS, includes killing off Firefly, having MAS to sponsor his QPR football team and unfair advantageous competitive position from having seen inner workings of MAS. 

Tan Sri Tony Fernandes and Datuk Kamarudin Meranun have subsequently resigned as directors from MAS board on 2 May.

Therefore, the market reacted positively when the share swap deal was announced terminated on 2 May. MAS will no longer be restricted to focusing on full-service operations after this deal, which it had earlier agreed to cede the low-cost market to AirAsia as part of the share swap.

Even so, analysts are cautious over MAS fundamentals and financial performance. MAS reported a massive RM 2.6 billion net loss for its previous financial year 2011, Hwang DBS Research believes MAS net gearing could surpass its current 4.4 times as MAS seeks funding for scheduled delivery of RM3.5bil aircraft by its 2013 financial year.

MAS stock rose 11.5% (18 sen) since 2 May to week’s highest RM 1.34 on 3 May and closed at RM 1.24 at the end of this week.

Click Here for all latest posts on Malaysian Airlines

Stock Picks #4

Tasek Corporation Berhad (TASEK)

Week high : RM 8.98 (Up 31 sen – 3.6%)

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 this week.

Click Here for all latest posts on Tasek Corporation

Stock Picks #5

Top Glove Corporation Berhad (TOPGLOV)

Week Low: RM 4.48 (Down 21 sen – 4.5%)

"To recap last week, Maybank Research in its analyst report on 24 April upgraded TopGlove Corp from "SELL" to "BUY" raising its target price to RM 5.40 stating that TopGlove sales volume picked up in its latest quarter to almost back to its H1N1 peak as well as its key production cost (latex cost) has begun its seasonal downtrend.

Market took this news as positive as higher sales and lower production costs are expected to be beneficial to TopGlove's net profits in the coming months. TOPGLOV stock rose 5.6% since 24 April to week’s highest RM 4.72 on 25 April."

Click here for last week's commentary on TopGlove

Subsequently (this week), on 1 May, the Malaysian Government announced minimum wage to set at RM 900 and to be effective 6 months from date the Minimum Wage Order is gazetted.

Maybank Research stated in their earlier analyst report that they have not imputed for any minimum wage hikes in their model, citing TopGlove’s 5,500 unskilled workers being paid approximately RM 600/month but TopGlove is in the midst of installing more robotic arms at its nitrile plants to reduce its labour requirement.

Hwang DBS Vickers Research stated that Top Glove will be most affected by minimum wage policy and its earnings and margins are expected to be dampened in the immediate term.

HwangDBS said its sensitivity analysis showed earnings could fall by 5%-19%, if minimum wage of RM900 per month is implemented assuming no change in average selling prices. Nonetheless, HwangDBS expects additional staff costs to be passed to customers over time.

Market reacted negatively on potentially lower profit margins from the minimum wage policy even though it will only be effective only 6 months from the date the Minimum Wage Order is gazetted.

Take note that the government has also provided some flexibility whereby some allowances or fixed cash payments are allowed to be absorbed in the calculation for minimum wage. Furthermore, if Top Glove is able to pass through the staff costs increase by raising average selling prices, then the impact may be reduced.

TOPGLOV stock dropped 4.5% (21 sen) since 2 May to week’s lowest RM 4.48 on 3 May and closed at RM 4.55 for the week.

Click Here for all latest posts on Top Glove Corporation Bhd

On Other Stocks:-

Can-One Berhad - 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.

Click here for all latest posts on Technical Analysis

Kinsteel Berhad – On 1 May, the Malaysian Rating Corporation (MARC) had lowered its ratings on Kinsteel Bhd's RM200mil debt notes while the outlook for the ratings was negative.

The ratings agency said the ratings involved the RM100mil Murabahah commercial papers/medium term notes programme (CP/MTN) and RM100mil Murabahah MTN programme to MARC-2ID/A-ID and A-ID from MARC-2ID/AID and AID respectively

Market reacted negatively which saw KINSTEL stock price dropped 4.4% in a day on 2 May to the week’s lowest 43 sen. KINSTEL closed at 44 sen for the week.

Click here for all latest posts on Kinteel Berhad

Weekly Stock Picks Commentary Report (23-27 April 2012)

Malaysia Stock Picks

Week 17 (23-27 April) Stock Picks Commentary

Hi ! Welcome and thank you for being loyal reader of Malaysia Stock Picks site. Here are the stock picks commentary for Week 17 (23-27 April).

Stock Picks #1

Three A Resources Bhd (3A)

Week high : RM 1.35 (Up 12 sen - 14%)

On 23 April, AmReseach wrote that Three-A Resources Bhd's hydrolyzed vegetable protein plant in China will commence operations this month and is expected to account for 5% earnings in 2012 and 23% in 2013.

To recap, in late 2009, Wilmar International Ltd took up a 15.65% stake in Three-A. The plant is located near Wilmar's existing plant including Qinhuangdao Goldensea Foodstuff Industries Co Ltd, China’s largest soya protein producer.

Hence, it is widely expected that Wilmar will channel Three-A's products through its extensive sales and distribution network in China to food processors, particularly soya sauce producers.

Market took this news positively as the additional capacity and opportunity to leverage on Wilmar's established sales and distribution network in China are both beneficial to Three-A's financial performance from 2012 onwards.

3A stock rose 14% (12 sen) since 23 April to week’s highest RM 1.35 on 25 April and closed at RM 1.23 at the end of this week.

Click Here for all latest posts on Three-A

Stock Picks #2

DRB-Hicom Bhd (DRBHCOM)

Week high : RM 2.61 (Up 24 sen - 10%)

On 27 April, DRB-Hicom announced that it had received acceptances totaling 98.6% of the total issued and paid up share capital of Proton Holdings Bhd and will proceed to “compulsorily acquire” all outstanding shares.

Proton to be suspended from trading from 4 May 2012 onwards.

Market took this news as positive this will give DRB-Hicom total control over Proton to carry out their management strategies.

In addition, a market talk on possible sale of Lotus on 25 April (which was denied by DRB later on Friday) and the recent launch of Proton’s flagship car model Preve were expected to be beneficial to DRB-Hicom.

DRBHCOM stock rose 24 sen (10%) since 27 April to week’s highest RM 2.61 on the same day and closed at RM 2.54 at the end of this week.

Click here for all latest posts on DRB-Hicom

Stock Picks #3

Panasonic Manufacturing Bhd (PANAMY)

Week high : RM 23.50 (Up RM 1.54 - 7%)

On 23 April, MIDF Research initiated coverage on Panasonic and the analyst report highlighted Panasonic Malaysia strong cash position. It also reported that Panasonic has been consistently rewarding its shareholders with steady dividend payouts.

More impressively, the gross dividend payout ratio has exceeded 100% for the past few years, with the most recent payout ratio of 107% for FY11. Even though the company doesn’t have a fixed dividend policy, MIDF Research expects Panasonic Malaysia to continue churning out substantial dividend payouts to its shareholders.

Market took this news as positive as expectation of hefty dividend would be good for shareholders. The stock rose to a high of RM 23.50 already beating MIDF Research's target price of RM 21.62.

PANAMY rose 7% (RM 1.54) since 23 April to the week’s highest RM 23.50 on 26 April and closed at RM 22.50 at the end of this week.

Click Here for all latest posts on Panasonic Malaysia

Stock Picks #4

AEON Credit Bhd (AEONCR)

Week high : RM 10.26 (Up 61 sen – 6.3%)

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.

Click Here for all latest posts on AEON Credit

Stock Picks #5

TopGlove Corporation Bhd (TOPGLOV)

Week high: RM 4.72 (Up 29 sen – 6.5 %)

On 24 April, Maybank Research in its analyst report upgraded TopGlove Corp from "SELL" to "BUY" raising its target price to RM 5.40.

Maybank Research stated that TopGlove sales volume picked up in its latest quarter to almost back to its H1N1 peak as well as its key production cost (latex cost) has begun its seasonal downtrend.

Market took this news as positive as higher sales and lower production costs is expected to be beneficial to TopGlove's net profits in the coming months.

TOPGLOV stock rose 25 sen (5.6%) since 24 April to week’s highest RM 4.72 on 25 April and closed at RM 4.68 at the end of this week.

Click Here for all latest posts on TopGlove Corporation Bhd

On other stocks:-

Ramunia – Initial rumours on the RM 150 mil contract surfaced on news on 26 April but the stock has dropped since by 7.7% to 39 sen to end the week.

However, the stock has already rallied on 24 April (before the rumours was on news), surging an impressive 21% (7 sen) in one day to close at week’s highest 40sen.

Update: Ramunia has officially announced that it has received a letter of intent from Sarawak Shell Bhd on an estimated RM 150 mil contract on 27 April, Friday.

Seg International – Navis Capital announced a general offer on 25 April that it offers RM 1.714 to acquire all SEG shares. It currently has 58% stake in the company.

On 26 April, Kenanga recommended SEG International shareholders to reject the offer.and the market reacted negatively. Kenanga Research has set a target price of RM 2.41 for Seg International. Market has reacted negatively which saw a 5% drop in stock price.

Opening stock price was RM 1.81 on 26 April and dropped 5% to RM 1.72 to close the week.

Sunway Behad – On 24 April, AmResearch commented in its report that Sunway property year to date sales was weaker largely due to the impact of the 70% loan-to-value ruling introduced in November last year.

This is not a surprise as 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. Amresearch recommends a fair value of RM 2.70.

Sunway stock dropped 7.3% to week lowest RM 2.30 on 26 April and closed at RM 2.39 for the week.

Tanjung Offshore – On 24 April, Tanjung Offshore announced its proposal to sell its marine business to Ekuinas for RM 220 million and intends to distribute approximately RM130mil out of the total proceeds arising from the proposed disposal to its shareholders

The stock rose to a high of 97 sen on 24 April.

However, on 25 April, AmReseach and OSK Research commented that Tanjung Offshore divestment of the group’s only profitable business raises question on its earning prospects going forward

Market was worried about its current valuation despite expecting the special dividend payout of 44 sen per share.

Tanjung Offshore dramatically dropped 27% since the commentary by the research houses  on 25 April and closed at 71 sen for the week.

Eastern and Oriental – On 23 April, Eastern & Oriental Bhd (E&O) announced that it is acquiring a freehold office cum retail building in central London known as the Princes House for £20.25mil (RM100.9mil).

However, on 25 April, The Wall Street Journal reported that the UK has slipped into recession after GDP shrank for 2 consecutive quarters. To recap, the U.K. last entered recession at the height of a global banking crisis in 2008, and emerged from it in the third quarter of 2009 after five successive quarters of economic contraction.

Market is cautious about this purchase especially at times when the UK economy is facing uncertainty.

E and O dropped 4.8% since 23 April to close the week at RM 1.38.