Commodity Index CRB Up

CRB at 253. Crude oil at 63 (+ 2%). Gold at 979 (+ 2%).

Kinsteel, Resorts. E&O. KNM

Resorts well supported from RM2.65 level, closed at RM2.73

Kinsteel tumbled from 91 to 87 sen bf closing at 89. It should find support at 82 - 85 sen range.

E&O fall from 81 sen to 76. Let's see if it will break below 70 sen.

KNM still holding well but I suspect it will also slide to 75 sen.

Kinsteel "Fair Price"

To derive a simple "fair price" based on dividend declared.

Dividend declared = 1.7 sen tax exempted.
Dividend yield from its record = 2 %.
So "fair price" support level = 1.7/0.02 = 85 sen
Current price is at 92 sen, about 10 % from 85 sen
So you can buy at 82, sell 89 or whichever the market gives you at a profit.

Strongest support range 70 - 76 sen which is 10 % below the "fair price."

Resorts and Genting Losing Steam

Money is flowing out of this two counters. Resorts initially climbed to 2.89 but then slide to 2.75, below its opening price. Genting also closed lower yesterday.

Investors are just not convinced about the recent report that propose Genting or Resorts may be taking a stake in Macau gaming interest through MGM Macau. They just panic yesterday on OSK call to buy Resorts with RM2.58 as the entry price.

OSK Research made a buy call on Resorts at 2.58 with TP 3.25. This untimely call by OSK is just unprofessional and improper. I sympathise with those bought in at higher price than this call. Such a call definitely will cause panic selling in this counter and loss to many.

For those who have not bought in, wait for price to correct in 2.30 - 2.45 range which is a better entry range. Resort "fair price" is 2.66 so the said entry range is 10 % below. This range may never come so you'll have to find the strongest support price to make your entry.

Look also at the possible short term gain (price action) to make your entry. You are buying in to make a high probability gain in active counters trading, not hold long term. When price consolidates, make your exit.

To buy and hold long term, look for good dividend counters with reasonable liquidity.

Petronas Dagangan Profit Falls To RM810m

PETRONAS Dagangan Bhd's (PDB) pre-tax profit for financial year ended March 31, 2009, fell to RM810.29 million from RM908.36 million in the same period of 2008.

Revenue, however, rose to RM24.37 billion from RM22.30 billion previously, on the back of higher average selling price during the first half of the calendar year, it said in a statement to Bursa Malaysia today.

It said profit for the next financial year, however, would be impacted by fluctuations in petroleum product costs following uncertainties in the international oil prices and the global economy. The marketing arm of Petroliam Nasional Bhd operates 900 service stations, of which four are hyper-stations and more than 570 are equipped with the retail convenience store, Kedai Mesra.

Sime Darby Q3 down 85%.

SIME Darby, Malaysia’s top oil palm grower by market value, said quarterly net profit slumped 85 per cent as palm oil prices more than halved from last year’s record highs of RM4,486. Chief executive Datuk Seri Ahmad Zubir Murshid said in a statement today that Sime Darby would use its balance sheet to acquire undervalued assets, but did not elaborate.

The company said its industrial and property divisions were recovering, but its plantation business faltered due to the drop in crude palm prices and lower production as a result of biological tree stress.

Sime Darby, valued at about US$11.8 billion, said January-March net profit fell to RM165.68 million from RM1.11 billion a year earlier.
IOI Corp, Malaysia’s No.2 palm oil producer, said its January-March net profit slumped 97 per cent on the fall in prices, weaker output and foreign currency losses.

Singapore-listed Wilmar earlier this month said net profit grew 11 per cent as higher refining and trading margins offset lower revenues, and said it was optimistic about sustained demand from China and India.
Malaysian palm oil firms are more vulnerable to falling CPO prices than Singapore rivals as they are mostly operating in the upstream industries that supply palm oil to refineries.

Resorts Real Rally

If you had bought Resorts from RM2.45 and accumulated more on the last 3 trading days, you would have enjoyed a 14 % gain on your investment. The rally was so strong that whatever price I sold into it, it just went higher. I had to buy back on a higher price.

So I did a simple maths to estimate Resorts "fair price," based on dividend declared of 4 sen. Assuming Resorts recorded dividend yield of 3% and pay 4 sen twice a year, "fair price"= 8 sen/0.03 = 267. So fair price of Resorts is approx. RM2.67

Closing at RM2.80 today, it's just about 5% over fair price. I think Resorts will go higher given the liquidity in the rally. It's liquidity over the fundamentals in short term trading and scalping. Enjoy the ride on the coat-tails of the big boys who has the liquidity...

OSK rated Resorts a buy with TP RM3.25

Resorts World Bhd surged 8.1 per cent to RM2.79, the steepest gain since July 20, 2007, after OSK Research raised its rating amid speculation its parent, Asia’s biggest casino operator, may invest in a unit of MGM Mirage.
Genting Bhd, which owns 47 per cent of Resorts World, jumped 6.7 per cent to RM5.55
OSK upgraded Resorts World’s stock rating to “buy” and increased its target price to RM3.25 from RM2.58, saying were cheap valuation compared with Genting. Resorts World “had always traded at a 10 per cent to 20 per cent premium to Genting as it is indeed the group’s main earnings and cash-generative outfit,” OSK analyst Keith Wee said in a note to clients today.
Investing in MGM Grand Macau “could certainly pave the way for the group’s long-awaited entry into Macau’s gaming market,” he added.

US Dollar Index Falls 50%

US Dollar Index (DX) soared from 71 last year May as stocks market crashed sending investor fleeing to safe haven USD, T-bills. Peaking at 89 this year March, the DX has since broke down 50% to the 80 level.

Watch commodities index CRB (energy oil, base metals, precious metal, agriculture) rally if DX continues to slide.

Steel Sector Slipping

3.36pm
Looks like money is flowing out of steel and construction sectors.
Only Ann Joo, Southern Steel and Lion Ind is holding in the green.

KLCI is held up by Maybank, Sime, Axiata, IOI, Tenaga, KLK, PPB, PLUS, Astro and PBBank.

Money Flowing Into Plantation and Financial Sector

Plantation Index up 2.9% led by Sime
Financial Index up 2.3% led by Maybank

Someone highlighted to me that small plantation counter TDM paying gross dividend of 14 sen (net 10.5 sen), ex 23rd June- pay 21st July.
At share price of RM1.75 that's a neat 8%, better than ASM, ASW.
Mkt cap = RM380 m. Net profit = RM101 m. Shares Issued = 218 m.
Therefore EPS = 46 sen. Dvd = 14 sen.
Fundamentals: PE ratio = 4. NA = RM2.73
This is one buy and hold counter to place in your core portfolio. And sleep well.
Take the dividend year after year.

Compare this with my core holding of TH Plant, final dividend 7.5 sen, ex 6th May- paid 20th May
Mkt cap = RM 814 m. Net profit = RM83 m. Shares Issued = 487 m.
Therefore EPS = 17 sen. Dvd = 14 sen.
Fundamentals: PE ratio = 10. NA = RM 1.64
At current price of RM1.68, dividend yield = 14/168 = 8.3% gross

HS Plant. Final dvd 5 sen goes ex 1st June- pay15th June
Mkt cap = RM 1800 m. Net profit = RM130 m. Shares issued 800 m.
Therefore EPS = 16 sen. Dvd = 10 sen tax exempted.
Fundamentals: PE ratio = 14. NA = RM2.06
At current price of RM2.27, dividend yield (10/227) = 4.4% net
which is higher than bank FD

Classic Chart Pattern Predict Bad News Followed by Good News

Chart pattern suggests that the market will move lower over the next six weeks.


I received in my email an article by Rick Pendergraft pointing out the three levels of resistance that might keep S&P in check for next few months.

One of the striking thing on the chart is the symmetrical move from the neckline to the head and from the head back to the headline. Each of these moves lasted nine weeks. It doesn't have to be that well defined to fit as an inverse head and shoulders pattern but the formation is obvious.

A Good Clue to Where Market is Heading

S & P Index for 12 months. If you draw the long term downtrend line, you'll see the S&P has failed to breakout above the said trend line and is beginning to pulled back. If you do a Fibonaccii retracement of 50%, it's going to the S&P to 800 level. Or it could go lower to Fibo 68% and take a breather at 750 mark.

Still can't read direction of the market.? Don't worry. Just ask your child where the blue line on the graph is heading..

I sold of 80% of my holdings in the stock market during the last three days, with each day registering less gain. Now that's telling me things.......

To buy..? I'll wait for the S & P to do a double bottom within 6 months and buy around October to December.

AUD: Time to take your profit

Commodity Index CRB is headed south so commodity currency is likely to fall. US Dollar index DX will rise.

Time to take profit if you have bought in AUD at 2.40

Bloody May Day

Malaysian property and steel stock counters succumbed to heavy selling today following Wall Street slide on disappointing US retail figures.

E & O continue to fall, losing 4% from 87.5 sen to 84 sen. SP Setia, Sunrise, IGB all posted losses in their shares price.

Local steel counters Kinsteel, Lion Ind registered 9% and 10 % slide to 83sen and RM1.27 respectively. Ann Joo and Southern Steel shares price dropped by 2% and 5% respectively.

E & O Properties

On Friday, I posted that E & O is a counter worth watching. 52 weeks high at RM1.80 with price at 74 sen on Friday. To those who bought in on Friday or yesterday, you would have pocket a gain of at least 18% (RM1,400 per 1 big lot). It closed at 91.5 sen today. If rally continues, watch it take RM1.50

I continue to like this counter because it still has more upside compared to other property stocks. At 91 sen, it's about half of its highest RM1.80
Its low PER is attractive at 4

Steel Counter Kinsteel cf. Peers

Local steel counter Kinsteel rallied in the morning from RM0.83 to RM0.98 but retreated in the afternoon to RM0.84 before regaining 7 percent to close at RM0.89

Other counters closed with lower gains. Ann Joo + 3.7%, Southern Steel + 2.4%, Lion Ind + 3.8% and Perwaja +4.6%. Considering PER, Ann Joo (pe 8), S Steel (pe 7), Lion Ind (pe 1) and Perwaja (pe 8) may be a better buy than Kinsteel (pe 15).

Local Steel Counters Rally: Another 50%?

Local steel counters continue to rally. I predicted Ann Joo will take RM1.80 and Kinsteel to take RM0.80 but didn't expect it happen so soon (refer to my Tuesday post). Lion Ind followed suit.

If you look at current price, it's still half of 52 weeks high price. So I think it has more upside but I could be dead wrong. Anyway, I'm accumulating KNM (RM0.73) and KINSTEEL (RM0.83) until price action reverses. I'm hoping they'll surge past the RM1.00 like Lion Ind (RM1.20). Ann Joo is also my favourite play with good potential earnings.

If you had bought in earlier, continue to accumulate on price weakness. Strategy- buy to average up.
If you had not bought in earlier, buy 1 lot. If uptrend continues, buy to average up. If trend changes, wait for price to recover and sell.
In this forceful rally, I don't expect a sudden violent correction within one day that will bring you huge loss but a gradual correction within a few days. Watch the signal- weak price action over 3 days or downtrend in 3 straight days. Then we know market is consolidating for a new breakout or breakdown.

These counters and that of property/construction counters are the most to advance in a rally.
If you have lost money last year and wants to recoup your loss in the medium/ long term, consider investing (not trade) in steel, cement, property, construction sectors. I really hope you could recover your loss within 12 months.

One property counter to watch is E & O.
Its 52 weeks high is RM1.80 and currently trading RM0.75 and may take RM1.50 if rally persists. There are many others; IJM Land, Sunrise, YNH so pick your choice.

Metals & Mining Giant Vale (NYSE)

One of the largest mining listed on the NYSE. Price recovery indicates basic metals and materials sector worth looking into. Do your homework if you're contemplating to invest into hard commodity for medium to long term.

Commodity sector generally has dropped to a quarter of its highest but has since recovered. It's still not to late to invest in this sector as it has more room on the upside ( two third to highest). You can choose to invest and take profit when your entry price doubles.

Steel counter locals, Ann Joo, Southern Steel, Kinsteel, Lion Ind similarly has recovered from a quarter of their highest price. Current prices of these counters still has upside of about 2.6 - 2.8 times. Highest/Current price of Ann Joo 4.10/1.60 Kinsteel 1.70/0.65 Lion Ind 3.10/1.10

Watch Ann Joo take 1.80 and Kinsteel take 0.87, next week maybe...

Commodity Index Holding Above MA (50days)

CRB Index at 229