Remember the LORD for it is he who gives you the ability to produce wealth and so confirms his covenant... Deut. 8:18

Wednesday, July 29, 2009

Maybank May Cut Dividends to 30 sen

Year 2008 total EPS = 60 sen, total dividend = 52 sen ( 17 sen, 15 sen, 20 sen paid respectively post Nov., Feb., Aug. 2008 announcement).

Year 2009 total EPS = 48 sen (my estimate). No dividend has been paid out so far. Coming August, what will Maybank pay its shareholders is anyone's guess.
My guess is 30 sen. Therefore dividend yield = 30/650 = 4.7 %

If you're hoping for 5 % dividend yield, then look to buy at 30 sen/ 0.05 = RM 6.00
If you had bought earlier at RM 5.00, then you might just earn 6 % dividend this August.

Citigroup to give US govt 34% stake

The U.S. government will officially take a 34 percent equity stake in Citigroup Inc on Thursday, becoming the bank's largest shareholder in connection with a February bailout.The change follows the completion of two exchange offers designed to bolster the capital position of the nation's third-largest bank, widely considered the most troubled of the biggest U.S. lenders.

Investors have agreed to swap US$32.8 billion of preferred securities for common stock, and the government will swap US$25 billion. Citigroup conducted the offers after heavy credit losses and writedowns prompted a series of bailouts, including a US$45 billion injection of taxpayer funds from the Troubled Asset Relief Program. The bank increased the total size of the offers by US$5.5 billion after regulators ordered it to build that buffer following a "stress test" of its ability to handle a deep recession.

The exchange offers will leave Citigroup with more than 21 billion shares, up from 5.51 billion at the end of June. Citigroup has said it may conduct a reverse stock split before June 30, 2010, that would increase its share price, which has hovered near US$3 for much of the year.

Boustead. Digi.

Boustead Holdings Bhd, which is looking to raise as much as RM1.3bil in cash this year from selling new shares and disposing non core assets, plans to use the money to reduce the group’s debts and expand key operations, such as shipyards, property and plantations.
Its group managing director Tan Sri Lodin Wok Kamaruddin said the fund raising exercises “will enable the group to trim down its debt level, and at the same time get fresh funds for new acquisitions”.
“We want to rationalise our operations and focus on key areas;’’ property development, grow its plantation acreage and group’s shipyard operations.

DiGi Telecommunications Sdn Bhd has been named Malaysia’s most admired company for innovation by Wall Street Journal Asia for the third year running .
In a statement, the company said the Asia 200 Most Admired Companies survey also graded DiGi number three in the overall ranking of Malaysia’s Top 10 companies, up a notch from last year.
CEO Johan Dennelind ...For us, innovation is about bringing meaningful differences to our customers by making our mobile and internet services relevant, easy and affordable.” He added the company was passionate about exceeding its customers’ expectations and would continue to push the boundaries in ensuring excellent customer experience.

Tuesday, July 28, 2009

Sime's Dividend May Be Trimmed

Sime's year 2008 record dividends = 49 sen, derived from earnings per share (eps) of 59 sen
Up to third quarters ending May 2009, eps todate =21 sen only. With the fourth quarter earnings announcement due in Aug, I think Sime will not be able to match their 2008 total earnings and dividend payout.

More likely total earnings = 45 sen and dividend paid for year 2009 = 30 sen.
If this be the case, my fair price of Sime = 30 sen/0.04 = RM 7.50
P/E = 17

Monday, July 27, 2009

Major Currencies, Crude and Gold Inch Higher

European currencies up against Swiss franc. British pound climbs against US dollar.

CRB index inches up to 252 level. Crude and spot gold at US68/barrel and US955/oz.. Dollar index down at 78...

Malaysian stocks GenM (Resorts) taking higher grounds at RM 3.00, with Axiata (Telco) in hot pursuit of matching at least RM2.99 (net asset)...

Market info has it that the price of long steel bars in Malaysia has been reduced by RM100, from RM 1900 plus to RM 1800 plus... Noted...

Sunday, July 26, 2009

Axiata, Digi, PPB, QL: Capital Expenditure

QL Resources gained 20 sen from RM 3.06 to close RM 3.26 (more than 6 % gain). QL is expected to declare dividend of 7 sen in Aug.
PPB also closed with more than 6 % gain, from RM 13.60 to RM 14.50
Axiata remains unchanged at RM 2.90
Digi added 10 sen to close at RM 22.20

Saturday, July 25, 2009

DIGI = Dividend Stock

DIGI recently announced dividend payout of 49 sen, going ex. 1st Sept, payout 18th Sept 2009. Assuming 2009 total yearly payout of RM 1.50, yield = 150/ 2200 = 0.68 or 6.8 %

Looking at the financial summary of recent quarters, the revenues profits and earnings per share look sustainable. Total 2008 dividend payout = RM 1.88 therefore yielding 188/2200 = 8.5 %

Buy Digi for med to long term for dividend.

Do consider TM for 6 - 8 % dividend play also.

Buy Axiata on stock price dips for active trades or long term regional growth or buyout.

IOI Corp Stock Still Pricey To Me

I was asked if IOI Corp is a good stock to buy and hold for short/med term......
My personal opinion.........: No, not yet.... But for active trading gains--> yes..
IOI historic dividend payout for year 2008 = 17 sen
My criteria of fair price to pay for stock would be they generate at least a 5 % return dividend yield, so my fair price = 17 sen/ 0.05 = 340 sen or RM 3.40
This would be the price I'm willing to pay for the purchase, or RM 3.70 max
Earnings of IOI = 36 sen, so P/E = 340/36 = 9.4 (I'm comfortable with PE < 12)

But if you think earnings and dividends of IOI may increase in the near future, you may consider your purchase when stock price is at 17 sen/0.04 = 425 sen or RM 4.24 (PE abt 12)
Once earnings and dividends payout increases, stock price will appreciate..

IOI stock price recently closed at RM 4.86 (PE = 14)
Assuming you buy at this price to hold short/med term, your dividend yield may be 17 sen/486 = 0.035 or 3.5 % provided earnings remain 36 sen.
But looking at 2009 dividend payout ending June = 6 sen, and with the rights issue to raise cash, they may face difficulty matching 2008 dividend amount. This may mean that IOI is facing problem with earnings and thus stock price will drop. Assuming earnings drop to 18 sen, dvd payout is 9 sen, therefore P/E = 4.86/0.18 = 27 (high) and dvd yield = 9/486 = 1.9 %

Not a stock buy and hold for dividend. A stock for current short term trade, yes.
There're better stocks to buy for dividend play.

Thursday, July 23, 2009

Three Lions Roar Again.

Lion Corp, Lion Div, Lion Ind today saw ferocious moves and huge gain about 10% in the stock market again as investors plough money into steel sector.
Kinsteel and Perwaja surge approx. 6 %

Ann Joo led the trend a couple of days ago with unrelenting gain, starting at RM 2.06 on Monday and closing today aroung RM 2.24
Laggard Southern Steel started from RM 1.60 on Monday and ended today at RM 1.74

Buy Lion Div. Lion Ind. Southern Steel. Masteel
I'm still holding Ann Joo, buying into Lion Div, S Steel

Sunday, July 19, 2009

Plantations = Sustainable Business

I've been asked numerous times why I continue to advocate buying into plantation stocks. The simplest digestable reason is because the business is generally sustainable. It doesn't take rocket science to figure this one out.
Sime, IOI, KLK, GenP are investor's favourites and mine that see seemingly active trades. But for my core holding of plantation stocks that I buy and hold for dividend yield, here it is: TH plant, HS plant, TDM.

Fair Price Evaluation:
An extremely simple method to evaluate a reasonable fair price for some dividend yielding stocks is to take the historic dividend paid out/dividend yield. Assume earnings are sustainable, here's some valuation..
TH Plant. 14 sen/0.09 = 155 sen or RM 1.55
HS Plant. 10 sen/0.05 = 200 sen
TDM. 14 sen/0.08 = 175 sen

Let's look at others:
IJM Plant. 12 sen/0.05 = 240 sen
Boustead. 30 sen/0.09 = 300 sen
Sime 45 sen/0.06 = 750 sen
IOI 17 sen/0.04 = 425 sen

For some non-plantations:
Esso. 12 sen/0.05 = 220 sen
Pet Dag 45 sen/ 0.05 = 900 sen or RM 9.00
PLUS 16 sen/0.05 = 320 sen
GenM. 8 sen/0.03 = 265 sen
BjToto 26 sen/0.05 = 520 sen
Leader 3 sen/0.04 = 75 sen
Prestar 1.5 sen/0.03 = 50 sen
TM 26 sen/0.09 = 289 sen
Tanjong 73 sen/0.06 = 1216 sen or RM 12.16
YTL P 11 sen/ 0.05 = 220 sen
PPB 23 sen/0.02 = 1150 sen
Astro 10 sen/0.03 = 333 sen
MPHB 10 sen/0.06 = 166 sen
IJM 25 sen/ 0.05 = 500 sen
Bursa 18 sen/ 0.03 = 600 sen
KFima 3 sen/ o.04 = 75 sen
Pantech 3 sen/o.o4 = 75 sen
Ann Joo 12 sen/0.06 = 200 sen
S Steel 12.5/0.07 = 178 sen

There you go....
You can choose any stocks, look up its earnings, its historic dividend payout, its purported dividend yield and evaluate a fair price to purchase the stocks...

Friday, July 17, 2009

Putting the Gold in Goldman

As the stock market rallied, former Treasury Secretary Hank Paulson was busy explaining to the House Committee on Oversight and Government Reform how he coerced Bank of America CEO, Ken Lewis, to complete the purchase of Merrill Lynch last December.

Paulson explained how he “saved” Merrill Lynch. Left unsaid was how he destroyed the American system of free enterprise in the process. Paulson's testimony was alarming on at least three counts. First, he blatantly admitted to a form of coercion that closely resembles illegal intrusion into a private enterprise. Second, he offered his testimony as if it portrayed an honorable reaction to the credit crisis, rather than a dishonorable dereliction of his duties as Treasury Secretary. Third, no one seemed to care what crimes Hank Paulson may or may not have committed…as long as the stock market continued to rally.

In his own words, the law-bending former Treasury Secretary explained:“[S]ome have suggested that there was something inappropriate about my conversation of December 21st with [Bank of America CEO, Ken] Lewis in which I mentioned the possibility that the Federal Reserve could remove management and the board of Bank of America if the bank invoked the MAC clause [i.e., the material adverse condition clause to pull out of the Merrill takeover]. I believe my remarks to Mr. Lewis were appropriate. I explained to him that the government was supportive of Bank of America, but that it felt very strongly that if Bank of America exercised the MAC clause, such an action would show a colossal lack of judgment and would jeopardize Bank of America, Merrill Lynch, and the financial system. I further explained to him that, under such circumstances, the Federal Reserve could exercise its authority to remove management and the board of Bank of America. By referring to the Federal Reserve’s supervisory powers, I intended to deliver a str ong message reinforcing the view that had been consistently expressed by the Federal Reserve, as Bank of America’s regulator, and shared by the Treasury, that it would be unthinkable for Bank of America to take this destructive action for which there was no reasonable legal basis and which would show a lack of judgment.”

So there you have it. Lewis could have chosen either to abide by Hank Paulson's wishes or he could have chosen to "show a colossal lack of judgment” by pursuing a "destructive action for which there was no reasonable legal basis.” In other words, Paulson gave Lewis an offer he couldn't refuse: “Do what I say or be dismissed from Bank of America in disgrace.” Reading between the lines, it is not hard to imagine that Paulson’s threat also contained the implied threat of federal indictments and subpoenas, if Lewis failed to "play ball." Gee, sounds perfectly legal to us.

Meanwhile, back at the former Treasury Secretary's old stomping grounds, business continues as usual…or rather, as UN-usual. Despite the enormous volatility besetting all major financial markets during the last two years, Goldman Sachs has steadily increased its risk exposure, as measured by value-at-risk (VAR) – a widely utilized risk metric. VAR, as presented in Goldman’s quarterly reports, displays the firm’s probable maximum loss per trading day. During the recent quarter, Goldman’s daily VAR established a new record high for the firm of $245 million. One might have imagined that last fall's stock market collapse, coupled with the near-implosion of the financial system, would have reduced Goldman's appetite for risk just a smidge. But the VAR data tell the exact opposite story.Goldman upped its risk exposure, even while borrowing billions of dollars from the government. And by the way, Goldman's VAR did not merely increase in absolute terms, it also increased relative to the size of the company’s shareholder equity. In other words, no matter how you slice or dice the numbers, this swashbuckling financial firm has been ramping up its risk exposure.

This disturbing fact leads your California editor to ponder a couple of troubling thoughts:
Thought #1: Goldman's VAR data make all of us American taxpayers into complete stooges – utter patsies. Here we were, wringing our hands, listening to Wall Street's CEO’s tell us how urgently we needed to rescue the financial system, and watching Washington's elected (and unelected) officials dole out hundreds of billions of dollars to Wall Street firms.
But there THEY were, taking the bailout monies and taking the subsidized loans, in order to take advantage of the collective national desire to save our financial system. There THEY were INCREASING the balance sheet risks that landed us in this desperate situation in the first place!

Thought #2 (possibly related to Thought #1) Goldman’s new risks may not be as risky as they would appear. Here's why: Bear Stearns and Lehman Brothers are gone, while Bank of America/Merrill Lynch, Citigroup, AIG and many other financial firms remained hobbled by their crippled balance sheets. Thus, several of Goldman’s former competitors are in no condition to compete. Without competition, therefore, Goldman's stated risk exposure may not be as risky as it would appear.Is there a connection between Goldman's soaring VAR and its disappearing competitors? Maybe.

Looking back over the last 12 months, we are all left to wonder why the former Treasury Secretary enabled some financial firms to survive, forced others into the arms of unwilling saviors and allowed others to fall into bankruptcy. No immediately apparent logic seemed to guide these disparate responses. To be a struggling financial firm in 2008 was to be a wife of Henry VIII - divorced, beheaded, died, divorced, beheaded, survived.And since no immediately apparent logic seemed to guide these capricious responses, perhaps some clandestine - or nefarious - logic guided these responses.

AIG survived, for example, and it promptly paid millions of dollars to Goldman Sachs to settle counterparty transactions. Lehman Brothers, on the other hand, died. Lehman’s elimination from the marketplace as a competitor bestowed an immediate and direct benefit to Goldman Sachs. Hmmmm…. interesting. (And let’s not forget that the decision to let Lehman fail and to bailout AIG both emerged from the same closed-door meeting between Hank Paulson and various finance company CEO’s, including Goldman CEO, Lloyd Blankfein. We're not pointing fingers, just raising a very skeptical eyebrow).All of this is ancient history, of course. And a delightful history is. Goldman Sachs is now America's most prosperous financial firm and the stock market is about 2,000 points above the low it hit in early March. So maybe it's time for critical skeptics and skeptical critics - like your California editor - to keep his mouth shut and enjoy the fruits of government intervention.
Maybe. But we critical skeptics can't seem to shake off our nagging suspicion that these fruits are rotten to the core, and that the first delectable morsels of our apparent economic "recovery" merely conceal the diseased morsels in the center. Goldman Sachs is thriving. Main Street is still breaking down. To pretend otherwise is to embrace the sorts of delusions that usually produce large capital losses(Rude Awakening's Editor Eric Fry).

Thursday, July 16, 2009

Market Rally on the Gold in Goldman

Hooray for “less bad!” Hooray for more risk! Hooray for quasi-legal governmental manipulation of the financial markets! Hooray for all three at once!...especially when share prices are soaring.

Yesterday morning we learned that America's industrial production was “less bad” than expected. Specifically, output at the nation's factories, mines and utilities fell “only” 0.4% in June - the smallest monthly drop in eight months. This terrific economic news, coupled with a cosmetically pleasing earnings report from Intel, powered the Dow Jones Industrial Average to a gain of 256 points.

Curiously, investors did not seem troubled that the very same report showing a modest – albeit seventh straight - drop in industrial production also showed a drop in capacity utilization to 68% - the lowest such reading in more than 40 years. Nor did investors seemed terribly troubled that the consumer price index (CPI) for June jumped a hefty 0.7%.

Nope, they didn’t seem troubled one bit. Instead, investors read the headlines, waited for CNBC to tell them the headlines were good, then rushed to buy stocks. By the time the dust had settled, several high-profile stocks like Intel (INTC), Microsoft (MSFT) and Goldman Sachs (GS) had reached fresh highs for the year. The stock market darlings never looked so adorable!

We’re happy to see points on the board, but distrustful of their durability. As we (almost) never tire of pointing out, “less bad” is not good, even though it might feel like it for a little while. Furthermore, no matter how many billions of dollars Goldman Sachs might make for itself (after the elimination of Lehman by former Treasury Sec. Hank Paulson) by playing games on computer screens, the overall economy will never regain its vigor until industrial production actually INCREASES, and until capacity utilization moves meaningfully higher than it was during the Johnson Administration.

The U.S. economy is still struggling. And the credit markets are still failing to function – mostly because the roots of the American financial system remain diseased. Thanks to the crisis-deferral tactics of former Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke, the American banking system is now grafted onto the diseased roots of dishonest asset pricing, deceptive accounting, capricious government intervention and malign regulatory overhauls.

We had the chance to implement constructive changes and we blew it. When we finally had the chance to purge of the rot from the financial system, we chose the exact opposite path: we bailed out the rot, and forced the healthy to subsidize the process. A handful of privileged folks are benefiting. The rest of us are paying with our taxes (Rude Awakening's Eric Fry).

Earnings: Nokia, Marriott, Harley, Baxter. Lender CIT

The world's top cell phone maker, Nokia Corp., on Thursday said second-quarter earnings fell 66 percent as the global recession sapped demand. The company scrapped its target to gain market share this year and its stock sagged.

Marriott International posts 76 percent slide in 2nd-quarter net income on lower revenue and hefty restructuring charges. The hotel operator also gave an outlook for the third quarter and full year that fell far short of Wall Street's expectations. Marriott and others in the industry have suffered in the recession as both business and leisure travel wane.

Harley-Davidson Inc. said Thursday it is cutting 1,000 more employees and lowering its motorcycle shipment guidance as quarterly earnings continued to fall due to weaker sales

Specialty drug and medical device maker Baxter International Inc. said Thursday its profit rose 8 percent in the second quarter on better margins, more than offsetting a decline in sales....

Stock futures are trading in a narrow range Thursday after excitement that JPMorgan Chase & Co.'s earnings easily beat estimates was tempered by concern that a top lender to small businesses could collapse. Overseas markets were modestly higher. The market had been surging throughout the week on upbeat earnings reports and forecasts, restarting a rally that stalled last month. After three days of gains, caution has returned as small and midsize business lender CIT Group Inc. said negotiations with regulators about a possible rescue broke off after days of talks. That raised expectations that the New York-based financial firm could file for bankruptcy protection

Monday, July 13, 2009

SGX: IndoAgri. Capitaland

IndoAgri 52 weeks range 037 - 223. Now at 103
Capitaland 52 weeks range 170 - 630. Now at 331

Making Money From the Market

John Henry is a professional futures and commodities trader. The son of a farmer, he started out trading corn and soybean contracts. He founded John W. Henry and Co. in 1982 to manage family money after his father died. He launched his flagship fund in 1984, named the Financial and Metals Portfolio. The fund gained 61% in the first two years. Then the crash of 1987 hit Wall Street. The stock market fell 23% in one day, but Henry's fund soared 252%.

By 1995, JWH was one of the largest asset-management firms in the world, with over $1 billion under management. By 2005, he controlled over $3.4 billion... In a recent Bloomberg magazine article, Henry states that he only makes money on 38%-40% of his trades. In other words, more than 60% of his trades lose money. Even though most of his trades are losers, Henry is still able to make a fortune from the market.

According to this article, John Henry's Financial and Metals Portfolio has returned 22% annually over the last 25 years... That's a better track record than Warren Buffett, the world's most famous investor. Buffett has returned 20% a year over the last 44 years.

Last year, while the S&P was plunging 38%, the Financial and Metals Portfolio rose 47%. There are two pillars to John Henry's trading style. First, he follows trends. He doesn't care about economic growth, budget deficits, or unemployment rates. When a stock rises, he buys it. When a stock is falling, he shorts it. It's as simple as that. As John Henry puts it, "We buy high and sell low."
Second, he lets his winners run and he cuts his losses quickly. This is why he has such a high percentage of losers. He takes many small losses. But when he finds a big trend, he rides it as far as he can.

Henry is proof that you can make millions in the market by taking lots of small losses... and holding onto huge winners that far exceed the little dings along the way. He's proof that "cut your losers and ride your winners" works day in and day out.

You can copy John Henry's trading style by looking for "breakouts." This is when a stock or commodity busts through to a new price level. It works in both up and down markets. Using breakouts to dictate your trading – even if you're paying attention to fundamental things like valuations and supply/demand – assures that you trade with the market, rather than against it (Daily Wealth's Tom Dyson).

Friday, July 10, 2009

S&P500 Head/Shoulders Projection

A head-and-shoulders pattern is developing in the chart of the S&P 500. This is a bearish pattern and indicates the reversal from a bull trend to a bear trend.
You can calculate the projected move by taking the difference between the top of the head (950) and the neckline (880) and subtracting it from the neckline. (Here's how the math works: 950 minus 880 equals 70. Then 880 minus 70 equals 810.)
So if the index drops below the neckline, the intermediate bear trend is in force, and the pattern projects a move all the way down to 810.
The S&P came close to breaking the neckline. But the bulls were ready to defend that level vigorously. And we were unlikely to see the chart break down on the first attempt. Instead, the S&P will probably bounce and form a lower high before it finally rolls over and completes the pattern.
The sector that looks most vulnerable is the financials (Jeff Clark's play)…


For you "trend watchers" out there: Crude oil is looking bearish these days...
After suffering one of its greatest collapses of all time, crude oil became super-cheap relative to gold late last year. Crude rallied over 100% after that.
But as we noted three weeks ago, oil is no longer a bargain compared to gold. The "easy, early" money has already been made going long oil. Now, the money is being made on the short side.
Oil is down 12% in the past month. And as you can see from today's chart, oil just sliced through its bullish trendline, which has been in force since March. That's the bearish "technical side" of the market...

On the fundamental side, you have a weak economy using less gasoline. Worldwide usage is suffering its worst decline in nearly 30 years. Above-ground supplies of fuel are robust. Given the supply/demand picture and the bearish trendline violation, crude could easily make its way back down to $50 per barrel (Brian Hunt's Market Notes).

Major Crossroads: Buyers Exhausted

Last week, we saw more good news. Data showed American manufacturing was stronger than expected and the housing market is stabilizing. The S&P 500 was only able to rise a measly 0.4% the day this news came out.
Then on Thursday, the Bureau of Labor Statistics released the monthly unemployment report. It showed a large increase in unemployment. This news shook the stock market. It fell almost 3% that day.
The market's reaction to news is one of my favorite prediction tools. It's plain to me that right now, the S&P is shrugging off good news and responding dramatically to bad news. After a 44% rise in three months, this action tells me the bulls have exhausted their buying power and sellers have all the chips.
Now look at a chart of the S&P 500. The market has lost 8% in the past three weeks, after a huge run up, and the trend is clearly turning down. This could get ugly. (Daily Wealth's Tom Dyson)...

Tuesday, July 7, 2009

Stick with Defensive Stocks, for now.

Miners and oil plays were among the big fallers as metal prices slipped and oil prices continue to ease back to around $62 a barrel. Deutsche Bank warned that miners were already priced for the recent recovery in metal prices. “We believe commodity prices will need to keep going up for significant rises from here.” The trouble is, we suspect the next move – in the short-term at least - will be down. With demand in the global economy still weak, it seems difficult to justify current commodity price levels, let alone even higher ones. And that means things don’t look great for the miners. On the other hand, defensive stocks were higher as investors looked for safe havens, with tobacco stocks and consumer good companies among the top gainers (excerpts from MoneyWeek).