Wilmar delaying HK IPO amid volatile market

Singapore’s Wilmar, the world’s biggest listed palm oil producer, is likely to delay the US$3 billion (RM10.44 billion) listing of its China unit as concerns about frothy markets hurt investor sentiment.

“The listing of Wilmar China Limited on The Stock Exchange of Hong Kong Limited is still in progress and has reached an advanced stage but no decision has been taken as to the specific timing of the listing,” Wilmar said in a statement. “The structure and the expected timetable have not been finalised and are dependent on market conditions.”

Wilmar’s share price fell as much as 6 per cent to its lowest in almost six weeks before recovering to trade 3.2 per cent lower at S$6.30 (RM15.47) — still underperforming Singapore’s benchmark index, which was down 0.7 per cent.

Wilmar, which owns oil palm plantations and runs milling, crushing, refining and processing plants in Indonesia and Malaysia, has said the China operation generated about US$600 million in profit and US$14.3 billion in revenues in 2008.

PEG Ratio

There's one measure of valuaton, PEG ratio which attempts to compare companies or sectors with differing growth rates. The PEG takes the price/ earnings ratio and divides it by the expected earnings per share growth. The lower the number, the more attractively valued the company or sector.

Take IJM and Gamuda.

IJM at RM6.45 (before ex.) PE = 645/32 = 21. Expected earning per share = 24. So PEG is less than 1.0

Gamuda at RM3.23. PE = 323/ 16 = 20. Expected earning per share = 8. So PEG is about 2.5

Both companies have similar PE ratio but expected eps for IJM is higher. Which then is an attractive valued stock..?

You can do this simple exercise for several of the companies you're contemplating buying into and post your comments here.

TA cuts major Malaysia stocks to sell

TA Securities has downgraded major Malaysian stocks to "sell" because of higher probability for more significant profit-taking correction ahead.

The downgraded stocks include CIMB, Gamuda, IOI Corp, Sime Darby, Tenaga and TM . The research firm also has a “maintain sell or take profit" call on Kencana Petroleum, SapuraCrest and Kurnia Asia for further correction from recent gains.

TA has recommended "buy on dip" in its daily note for lower liner construction-related stocks such as Sino Huaan, Kinsteel , MRCB, UEM Land, Zelan, and LCL Corp.

Oil Set To Slide. A Rising Market Feeds Itself

Stocks were far from the only assets feeling the jitters yesterday. Crude oil futures took a tumble too, sliding to below $66 a barrel. US inventories of pretty much all oil and petroleum products rose last week, according to the Energy Information Administration. This shows that “oil consumption is in no way recovering as well as the broader economic conditions are,” according to Sucden Financial Research analyst, Nimit Khamar.

This notion that broader economic conditions are recovering is an interesting one. Things might be getting ‘less bad’ but in truth, the only ‘indicator’ that’s really taking off is the stock market. Bulls often like to point out that the stock market doesn’t necessarily need the economy to be strong for it to put in a good performance, which is a fair point. But at the same time, investors tend to assume that a rising market means that the economy must be getting better.

As MoneyWeek regular, Pali International’s James Ferguson, points out in this week’s story: Just how long can this rally go on?, a rising market feeds off itself. People see the market going up, and they start to believe that it contains genuine information. After all, if the market’s efficient and the market’s always right, then if it’s rising, an economic recovery must be just around the corner. And if a recovery is just around the corner, you want to be buying stocks. So investors buy stocks, driving the market up even further.

Of course, then they see the market rocketing, and assume that this means the recovery is going to be even stronger than anyone expects. Which means you should be buying even more stocks. After all, who are you to question the market? But eventually the market reaches a point where it’s supremely vulnerable to disappointment, and investors start to expect some sort of genuine economic recovery. And when they’re disappointed, we’re likely to see all sort of assets take a tumble, stocks, oil, and even gold – at least in the short-term.

Citigroup keeps 'sell' calls on IOI, KLK, IJM Plantations

US bank Citigroup has maintained its stand that investors should sell shares of IOI Corp Bhd (1961), Kuala Lumpur Kepong Bhd (KLK) and IJM Plantations Bhd because they are already expensive relative to their forecast earnings.

It also downgraded Sime Darby Bhd to "hold" from "buy", having considered the conglomerate's valuations no longer compelling."An attractive feature of Sime Darby was its dividend yield. But with the recent share price rally, dividend yield is close to only 3 per cent currently," Citigroup said in a research note to investors.

Malaysian plantation stocks are highly valued, thanks to buying from local funds. Foreign shareholdings for Sime Darby and KLK are still below below 15 per cent of total shareholding.
With the rise in palm oil prices over the past two months, price to earnings (PE) of Malaysian plantation counters are now above or at historical averages. The research house expects palm oil prices to stay flat in the near term

Stocks struggle to hold one-year highs

NEW YORK (CNNMoney.com) -- Investors are wary after the Dow, Nasdaq and S&P 500 closed at the highest levels in nearly a year. Reports on housing and jobs underpins support.

Stocks struggled to move higher Thursday morning, as enthusiasm over upbeat housing and jobs reports waned and the major gauges continued to flirt with one-year highs.
The Dow Jones industrial average (INDU) edged up 17 points, or 0.2%, after ending the previous session at its highest point since Oct. 6, 2008. The S&P 500 (SPX) index gained about 2 points, after ending the previous session at its highest point since Oct. 3 of last year. The Nasdaq composite (COMP) was flat after closing at its highest point since Sept. 26, 2008.

U.S. stocks spiked to one-year highs Wednesday amid continued economic optimism. Thursday brought new reports supporting hopes that a recovery is underway, but investors weren't impressed.

A combination of improving economic news and fiscal and monetary stimulus has helped boost stocks over the last six months. Since bottoming at a 12-year low in March, the Dow has gained 47% and the S&P 500 has gained 55%. Since bottoming at a 6-year low, the Nasdaq has gained 65%.

But this is cause for concern rather than celebration, said Philip Isherwood, equities strategist at Evolution Securities in London. He said the markets are being artificially inflated by the massive stimulus from the U.S. and other governments, "rather than realistically reflecting fundamentals."
"At some point you'd expect markets to reconnect with a more muted reality, but short term that isn't the case," said Isherwood. "The market doesn't wait for the economy and it doesn't wait for investors, either."

There could be some volatility ahead of Friday, the day of quadruple witching, when contracts expire on stock index futures, stock index options, stock options and single stock futures.

Citi shares could, finally, see solid demand

NEW YORK (Reuters) - Citigroup Inc is slowly regaining favor among institutional investors, a development that could help the U.S. government unload its 34 percent stake in the still-troubled bank. A series of bailouts has put taxpayers on the hook for tens of billions of dollars of potential losses, but left Citigroup with some of the strongest capital ratios in banking.

Citigroup may also have suffered many of the steepest losses it faced in its consumer loan and lease portfolio. The government is covering some potential losses on the bank's most toxic assets, and Citigroup shares trade at a lower valuation than many of its competitors.
That seems to be translating to investor demand. Citigroup shares have more than quadrupled since early March, closing Tuesday at $4.12.

Even hedge fund manager John Paulson, who famously shorted banks and brokers going into the financial crisis, has been buying the bank's shares, a source familiar with the matter said.
Three other fund managers who long shunned the stock said they may start buying. They requested anonymity because they do not want to disclose investment positions they have not taken.

"If you've got a one-to-two year time horizon, the stock could trade into the teens," said Marshall Front, chairman of Front Barnett Associates in Chicago, who also bought Citigroup stock recently. "The possible reward looks good compared to the risk."

In the near term, there are risks.
The bank has been profitable in each of the last two quarters because of one-time gains and accounting items, but has not posted a quarterly profit from its main operations since 2007.
There is also the risk of the government selling a large number of shares into the market. Concerns about such a sale drove Citi shares down 8.85 percent on Tuesday.

LOW INSTITUTIONAL OWNERSHIP
Sources told Reuters the bank is talking to the government about how the U.S. should shed its 7.7 billion Citi shares.
The bank may sell another $5 billion of shares to raise funds to start buying back about $27 billion of other Citi securities that the government owns, the sources said. Those securities, known as trust preferreds, are a hybrid of stocks and bonds. These sources requested anonymity because the talks are private.

Time for Rebalancing My Portfolio

Back from Korea, enjoyed the weather, people and the fantastic deal I got from the currency exchange of 1,000KW to RM 2.86, compared to RM3.93 I paid last year. Korean Won is seen to be on the uptrend. Buy and hold will make you handsome gain. Stayed in Sofitel Ambassador Hotel at Namsan (clean air) and Seoul Olympic Parktel in Gangnam (amazing view of Olympic Village landscape). Good break.......

Now that I'm back, I'm getting the feel of the sentiment of the local stock market for the past 2 weeks by reading my favourite list of blogger's site. Bloggers are such a wonderful lot to thank for. I've always appreciate the time, effort and energy they've put into sharing their thoughts with the blogging community.

Cautiously optimistic, I'll buy into the market. My current shares/ cash ratio is 60/40 and I'll increase my shares holding upto 90%.
Current holdings = Axiata, BJtoto, DIGI, GenM, HSPlant, Hubline, LionDiv, MBB, QL Reso, TDM, THPlant, TM
Sold = AnnJoo, Axiata (part), IJMLand, QL (part)
Opinion = still overweight on property, resorts, building materials, telecommunication, power generation. Loves Axiata, Digi, GPacket, AnnJoo, SouthSteel, LionInd, Kinsteel, LeaderU, YTLCement, IGB, IJMLand, E & O, Maybulk, YTLPower