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Over the weekend, we have a "promising" write-up in The Star newspaper about Scomi's prospect. (here). It is premised on the entry on new and well-connected shareholders and the huge contracts in the rail sector in the next 5-10 years.

I am not entirely convinced by the story. These are my doubts:
1) I don't believe Scomi rail expertise is exceptional. If its workmanship is up to the standard, Prasarana would not have disputes with Scomi for the trains delivered in 2011 (here). One may argue that Prasarana must be reasonably happy with Scomi's train since it has recently awarded additional contract to Scomi (here). I have to admit that the latter statement does negate my earlier statement but stranger things have happened in Malaysia. 
2) The bigger contracts, such as ECRL and possibly HSR, are beyond the reach of Scomi. There are a few MRTs and/or LRTs in the pipeline but the competition will be very stiff. Scomi will have to prove that they have the products to compete.  
3) Why did IJM choose not to takeover Scomi, and use it to bid for contract? Remember IJM bought into Scomi in 2012 to gain entry into O&G business as well as the transport solution business, such as rail infrastructure (here). Alas, IJM has given up on turning around Scomi and put its stake up for sale in early 2019 (here). That says a lot about Scomi.
In my previous post, I computed the "true" net assets per share wrongly. The number of outstanding shares is not 120.239 million, but 1093 million. Thus, the "true" net asset per share should be RM0.003. This will give you a Price to Book Value of 33 times (computed by dividing share price of RM0.10 by the "true" net asset value per share of RM0.003). If that's not expensive, I don't know how expensive looks like! It is fair to say that Scomi is a stock to be avoided!
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Yesterday evening (July 18), Scomi surprised investors when it proposed to revise its current share capital from RM224.96 million to RM3 million, instead of the earlier announced RM 40 million. For more, go here


The revision was made less than 12 hours after it was announced that Wan Azmi and the ex-Renong MD will inject new capital into Scomi based on a restructuring involving inter alia a proposed share capital reduction which entails the reduction of the issued share capital of the company from RM224.96 million to RM40 million. For more, go here


When a company reports a drop in profit from tens of millions of ringgit to a mere few thousands ringgit, you know they are trying to avoid reporting a loss. 

Similarly when a company reduced its capital from hundreds of millions of ringgit to a mere RM3 million, they are trying to avoid reporting that it may be worth nothing- or worse nothing.

Imagine if you are a savvy corporate man like Wan Azmi, you won't want to get into a messy situation when the whole business environment is a buyer's market. This means the rescue deal may collapse anything. 

****

You may say, all these are pure conjecture. Then, let's look at the numbers.

Assuming the revised reduced capital of RM3 million is the true book value of Scomi, we can compute the "adjusted" price to book value of the stock by dividing RM3 million with the outstanding shares of 120.329 million. This will give you the book value per share of RM0.025. 

At the current price of RM0.105 (as at 10.34 am), Scomi is trading at an “adjusted” price to book value of 4.2 times (computed by dividing 0.105 by 0.025). That's a very rich valuation to peg onto any stock let alone a distress stock. For your information, Gamuda's PBV is 1.3 times. Thus, it is a good price to sell now.

Based on the above, you may want to take advantage of the “euphoria” to get out.  

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Next Trade by Alex Lu - 5d ago
Result Update

In QE31/5/2019, Zhulian's net profit rose 81% q-o-q or 62% y-o-y to RM19.5 million while its revenue rose 33% q-o-q or 19% y-o-y to RM52 million. Revenue rose y-o-y mainly attributable to higher sales both locally and in Thailand. Profit before tax rose y-o-y mainly attributable to higher sales with diligent cost control and higher share of profit from an associate.


Table: Zhulian's last 8 quarters' results


Graph: Zhulian's last 51 quarters' results

Financial Position

Zhulian's financial position as at 31/5/2019 is deemed healthy with current ratio at 6.1x and gearing ratio at 0.07x. It has no borrowing but cash in hand of RM159 million (or, 35 sen per share).

Valuation

Zhulian (closed at RM1.44 yesterday) is now trading at a trailing PER of 10.8x (based on last 4 quarters' EPS of 13.39 sen). If the cash in hand is deducted from share price, Zhulian's PER will be reduced to 8.1x only. In addition, Zhulian paid dividend of 10 sen last 4 quarters, which translates to a dividend yield of 6.9%.

Technical Outlook

Zhulian is trading in a range of RM1.35 & RM1.45 over the past 3-4 months. There is no sign that the sideways movement is likely to change in the near term.


Chart 1: Zhulian's weekly chart as atJul 17, 2019 (Source: Malaysiastock.biz)


Chart 2: Zhulian's monthly chart as atJul 17, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance, satisfactory financial position and fairly attractive valuation, Zhulian could be a good income stock for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.
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Last Friday, FBMKLCI pulled back to its medium-term uptrend line, SS at 1677. It rebounded to close at 1683. MACD is poised to do a negative cross-under. At the same time, +DMI and -DMI are starting to converge. Thus, it is critical the market should get more buying support early this week, failing which we may see a bearish MACD cross-under and a longer consolidation in the market. We will have to wait and see how this will turn out.


Chart: FBMKLCI's daily chart as at July 5, 2019 (Source: malaysiastock.biz)
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Result Update

In QE30/4/2019, Astino's net profit rose 35% q-o-q but dropped 2% y-o-y to RM8.6 million while its revenue dropped 6% q-o-q but rose 4% y-o-y to RM141 million. Revenue dropped q-o-q primarily due to decrease in local demand from RM130.1 million in preceding quarter to this quarter RM120.8 million. The Group’s profit before taxation rose to RM10.9million from RM9.6 million recorded in the preceding quarter- mainly due to decrease of allowance for diminution in value of inventories.


Table: Astino's last 8 quarters' results


Graph: Astino's last 48 quarters' results

Financial Position

Astino's financial position as at 30/4/2019 is deemed healthy with current ratio at 2.3x and gearing ratio at 0.4x.

Valuation

Astino (closed at RM0.685 last Friday) is now trading at a trailing PER of 9.1x (based on last 4 quarters' EPS of 7.55 sen). At this PER, Astino is deemed fairly valued.

Technical Outlook

Astino is still in a long-term uptrend (see Chart 1). It peaked at RM1.26 in July 2017 and thereafter the share prices have been in a slow decline due to poorer financial performance. An upswing can only begin if Astino can surpass its intermediate downtrend line, RR at RM0.70 (see Chart 2).


Chart 1: Astino's weekly chart as at Jun 28, 2018 (Source: Malaysiastock.biz)


Chart 2: Astino's daily chart as at Jun 28, 2018 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance, satisfactory financial position, fair valuation and mildly bullish technical outlook, Astino could be a good stock for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.
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Following the "successful G20 meeting" where Trump behaved rationally, global stock markets will likely put in a strong rally next week. As for our market, we will likely to participate in this rally as FBMKLCI has consolidated for the whole of last week after it broke above its downtrend line, RR at 1665 on June 20. Good luck to your trading or investing next week!!   

Chart: FBMKLCI's daily chart as at Jun 28, 2019 (Source: Malaysiastock.biz)


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Result Update

For QE30/4/2019, Scientx's net profit dropped 1% q-o-q but rose 19% y-o-y to RM73 million while revenue was rose 8% q-o-q or 38% y-o-y to RM828 million. The Group’s revenue rose q-o-q mainly due to contribution from the newly acquired subsidiary, Daibochi. Profit before tax for the current financial quarter was RM101.4 million, a marginal increase of 1.4% compared to RM100.0 million recorded in the preceding financial quarter.


Table: Scientex's last 8 quarterly results


Graph: Scientex's last 53 quarterly results

Financial Position

As at 30/4/2019, Scientex's financial position is deemed satisfactory with current ratio at 1.2 times and gearing ratio at 0.72 time.

Valuation

Scientex (closed at RM8.56 yesterday) is now trading at a trailing PE of 14.7 times (based on last 4 quarters' EPS of 58.43 sen). At this PER, Scientex is deemed fairly attractive.

Technical Outlook

Scientx was in an uptrend line, SS which accelerated in a steep uptrend lien, S1-S1 in 2016 & 2017. The share price then broke this steep uptrend line, S1-S1 and tentatively established a more gradual uptrend line, S1-test the uptrend line, S1-S2 at RM7.50. 


Chart 1: Scientex's weekly chart as at Jun 26, 2019 (Source: Malaysiastock.biz)


Chart 2: Scientex's monthly chart as at Jun 26, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on good financial performance, strong financial position, fairly attractive valuation and mildly positive technical outlook, Scientex remains a good stock for medium to long-term investment. 

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.
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Result Update

For QE310/4/2019, Redtone's net profit dropped 11% q-o-q but rose 53% y-o-y to RM4.8 million while revenue rose 62% q-o-q or 132% y-o-y to RM73 million. Revenue rose q-o-q mainly due to higher revenue from Managed Telecommunication Network Services ("MTNS") segment.


Table: Redtone's last 8 quarterly results


Graph: Redtone's last 33 quarterly results

Financial Position

As at 30/4/2019, Redtone's financial position is healthy with current ratio at 2.5 times and gearing ratio at 0.5 time.

Valuation

Redtone (closed at RM0.305 yesterday) is now trading at a trailing PE of 15 times (based on last 4 quarters' EPS of 2.01 sen).  At this PE, Redtone is still deemed attractive for a turnaround stock with room for further growth.

Technical Outlook

Redtone is trying to stay above its long-term downtrend line, RR as well as its intermediate uptrend line, RR- both at RM0.29.


Chart 1: Redtone's weekly chart as at Jun 25, 2019 (Source: Malaysiastock.biz)


Chart 2: Redtone's daily chart as at Jun 25, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance, healthy financial position and mildly bullish technical outlook, Redtone could be a good stock for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.
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Yesterday FBMKLCI rose 13.78 points (or 0.83%) to close at 1666.54. Gainers out-numbered losers 474 to 330, with 405 counters traded unchanged.

FBMKLCI has gone marginally above the intermediate downtrend line, RR at 1665. Though unconvincing, this upside breakout could signal the end of the past 1 year downtrend. What comes next will either be a sideways market or an uptrend. With the Malaysian economy in doldrums and our political scene in a state of confusion, it is hard to believe a bullish market will emerge. 

Let's wait and see.

Chart: FBMKLCI's daily chart as at June 19, 2019 (Source: Malaysiastock,.biz)
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Results Update

For QE31/5/2019, Topglov's net profit dropped 29.4% q-o-q or 36.5% y-o-y to RM74.7 million while revenue rose 2.6% q-o-q or 8.1% y-o-y to RM1.190 billion. Revenue increased due to 2%-increase in Sales Volume plus increase in ASPs.

Meanwhile, Profit Before Tax and Profit After Tax eased by 34.5% and 29.5% respectively. This was attributed to a 22% surge in the price of natural rubber latex compared with QE28/2/2019, coupled with strong competition as well as the time lag in passing on cost to customers, which affected the natural rubber glove profit contribution. However, the situation has improved from May 2019 onwards due to the effect of selling price revision. The nitrile latex price decreased slightly by 3.1% to USD1.05/kg, which mitigated the impact from competition in nitrile glove segment.

 
Table: Topglov's last 8 quarterly results


Graph: Topglov's last 50 quarterly results

Valuation

Topglov (closed at RM4.87 yesterday) is now trading at a trailing PE of 32 times (based on last 4 quarters' EPS of 15.35 sen). At this PER, Topglov is deemed overvalued.

Technical Outlook

Topglov dropped sharply yesterday after the release of its poor result during the mid-day break. The price tested the medium-term uptrend line, S1-S1 at RM4.65 before it recovered to close at RM4.87. It is possible that Topglov may re-test the medium-term uptrend line again given the sharp decline in earnings last quarter. If the medium-term uptrend line, S1-S1 cannot hold, the next support will be the horizontal line at RM4.20.


Chart 1: Topglov's daily chart as at June 18, 2019 (Source: Malaysiastock.biz)


Chart 2: Topglov's weekly chart as at June 18, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on weaker financial performance and high valuation, I revise my rating for Topglov to a Trading Sell. A good sale would be closer to RM5.00 and a good re-entry price would be below RM4.50.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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