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

Friday, July 8, 2011

GenM. TM.

GenM surges from RM 3.50 range finishing at 3.86, making a gain of 10 % within two weeks.
TM gains 4 % from 3.85 to 4.00 in the same period of time or 8 % since mid May at RM 3.70 ex. after it paid out 29 sen cap. repay + 13 sen dv. Three months back, most analysts were marking TM target price at RM3.50 to 3.90 after pricing in capital repayment of 29 sen + dividend of 13 sen. In my opinion, the analyst were shortsighted to account for the potential upside in telco sector. RM 5 is more like TP in the med-long term with more news of Axiata, Maxis collaborating with TM. Remember Axiata was in the RM 3.50 range when I call a buy in the regional telco player.
You can read my thoughts on TM in previous posting and why it should form the core of one's portfolio. Recent reading revealed that TM will embarked on a RM 11 billion HSBB, out of which RM 3 billion will come from Gov't.. Nice, very nice...

Is TM too expensive..? Not so if based on pure dividend alone, dv yield = 26/400 = 6.5 %
Is it the right time to take a position..? Yes, though my timing has always been lousy. But you can allocate 3 triggers; buy at RM4.00, RM3.70 and RM3.40

What if the stock market reverses..? Say you buy at RM4 and price plunges to RM3.70, here's what happen if you hold the shares. For 6 months, dividend payout min. 13 sen, + share price 370 = 383, you lose 17 sen (4.3 %). Hold for 1 year, dv payout is 26 sen, + share price 370 = 386, you lose 4 sen (1 %). Every 3 year gives you min 26 sen x 3 = 78 sen so should your share price drop to RM 3.22 in 3 years holding, you don't lose your capital.

Will it ever plunge to RM3.22..? It may and I'll be loading up with twice the existing holding in TM. Recap TM did a placement to local/foreign investor last year at RM3.25 and share price never touch down that level.

I invested for two friends CSM and EC, buying TM last year at RM 3.39 and RM 3.43. Gain in one year: dividend 13 sen, capital repayment 29 sen + dv 13 sen and capital appreciation 57 sen at current share price of RM4. Total = 112/343 = 32.6, say 33 %. Fabulous return in a year for a defensive laggard.

There are others who have gain much, much more when they bought in at RM 3.00 (390 - 90sen cap repay) two and half years ago. Todate they would have gain dv 13 sen, dividend 13 sen x 2, cap repay 29 sen + dv 13 sen and capital appreciation of 100 sen at current share price of RM4. Total gain = 181/30 = 60 %. To them, I take my hats off ..!

For beginners to stock mart, start loading up on TM in your stock portfolio up to max of 50% of your intended investment. Wait for share price to surge to 10-15% capital gain and a payout of first dividend of 13 sen. This will act as a hedge to protect your loss in other stock picks.
Happy investing ya...

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